MiFID II: Impact of the new European Regulations

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This report highlights certain incursions that MiFID II may cause based on the amendments to MiFID, as outlined in the EC consultation paper. A salient change is that legitimate hedging of positions by corporate and institutional investors will become more expensive and impact liquidity levels.

The report tackles the transparency requirements that the MiFID consultation suggests — highlighting that its universal approach cannot be applied to all assets — as many of the instruments it covers do not share the same fungibility as, for example, equities. The report points out that it is not clear how this rigid approach to transparency will be measured and how such an approach will not be able to adjust to market movements that are guaranteed certain to happen.

Published on: 25 Jul, 2011

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MiFID II: Impact of new European Regulations – Table of Contents

  • 1.0 Summary of Key Changes
    • 1.1 Transparency Requirements for Non-Cash Equity Instruments
    • 1.2 OTC Derivatives – Clearing Eligibility
    • 1.3 Extraterritoriality (“Third Country”)
    • 1.4 Proposal to Allow ESMA to Ban Certain Products or Set Limits
    • 1.5 Summarized Impact on Asset Classes and Business Areas
  • 2.0 MiFID I Impact On Banking Industry
    • 2.1 Existing Regulations
  • 3.0 Upcoming Regulations – MiFID II
    • 3.1 Probable Changes
    • 3.2 Industry Focus and Response
  • 4.0 Affected Business for Investment Banks
    • 4.1 Execution on Organised Trading Facilities
    • 4.2 OTC Derivatives
    • 4.3 Crossing Systems
    • 4.4 Automated Trading
    • 4.5 Market Surveillance
    • 4.6 Internalisation
  • 5.0 Commodity Derivatives
    • 5.1 Specific Requirements for Commodity Derivative Exchanges
    • 5.2 MiFID exemptions for commodity firms
    • 5.3 Definition of other derivative financial instruments
    • 5.4 Emission allowances
  • 6.0 Pre- and Post- Trade Transparency
    • 6.1 Cash Equity and Equity-like Instruments
    • 6.2 Bonds and Listed Derivatives
    • 6.3 OTC Products
  • 7.0 European Consolidated Tape & Post-Trade Data
  • 8.0 Transaction Reporting and Market Abuse Detection
  • 9.0 Investor Protection and Provision of Investment Services
    • 9.1 Activities, Services, Exemptions and “Execution Only” Regime
    • 9.2 Complex Product Reporting and Inducement
    • 9.3 Classification of Clients
    • 9.4 Liability of Investment Firms
    • 9.5 Execution Quality
  • 10.0 Authorisation and Organisational Requirements
    • 10.1 Organizational Criteria
    • 10.2 Client Assets
    • 10.3 Underwriting and Placing
  • 11.0 Increased Supervision and Regulatory Power
    • 11.1 Additional Supervisory Powers and Sanctions – Regulatory Framework
    • 11.2 Access of Third Country Firms to EU Market
    • 11.3 Ban on Specific Activities, Products or Practices
    • 11.4. Oversight of Derivatives Positions
  • 12.0 Conclusions