The second Markets in Financial Instruments Directive
(2014/65) (MiFID II) came into force on 3 January 2018,
alongside the Markets in Financial Instruments Regulation
(600/2014) (MiFIR). Both pieces of legislation set out
the framework of requirements for investment firms
operating in the EEA and are aimed at achieving more
transparency and greater protection for investors.
European implementation of MiFID II
European Commission FAQs on MiFID II inducements and research reforms
On 26 October 2017, the European Commission
(Commission) published a set of FAQs on the application
of MiFID II to third country broker-dealers in order to
assist MiFID II portfolio managers and their third country
sub-advisors with implementation of MiFID II in a crossborder
context. The FAQs reflect the Commission’s
position and do not constitute authoritative interpretation
of EU legislation but are likely to be followed as it is
expected to be some time before any more authoritative
interpretation is given.
The FAQs have been published following discussions
between the Commission, the US Securities and Exchange
Commission (SEC) and other non-EU jurisdictions, after
UK market participants raised concerns with the FCA
that, as MiFID II comes into effect, they would be unable
to continue to access research in non-EU jurisdictions and
comply with the MiFID II requirements.
Following discussions with the Commission, the SEC has
also published a related press release providing
information about no-action letters which it issued to
facilitate the cross-border implementation of the MiFID II
The FCA published a statement welcoming the
announcements of the Commission and the SEC.
It explained that the announcements enable arrangements
that comply with MiFID II and other jurisdictions’ rules,
while allowing EU firms’ continued access to research
produced by US and other non-EU jurisdictions.
MiFID II technical standards published
On 26 October 2017, two sets of technical standards
required under MiFID and MiFID II were published in the
Official Journal of the EU (OJ).
1. Authorization of investment firms:
Commission Delegated Regulation 2017/1943 contains
regulatory technical standards (RTS) on information and
requirements for the authorization of investment firms.
The RTS, developed under Article 7(4) of MiFID II, contain
a harmonized list of information investment firms will
have to submit to be authorized. They also set out the
requirements applicable to the management of certain
investment firms and the requirements imposed on
shareholders and members with qualifying holdings.
Commission Implementing Regulation 2017/1945 contains
implementing technical standards (ITS) with regard to
notifications by the applicant firms and communication
between the competent authorities and investment firms.
The ITS, made under Article 7(5) of MiFID II, contain
standard forms, templates and procedures for the
notification or provision of information concerning
applications for authorization.
2. Acquisitions of qualifying holdings in
Commission Delegated Regulation 2017/1946, made
under Article 10a(8) of MiFID and Article 12(8) of MiFID
II, contains RTS on an exhaustive list of information to
be submitted by proposed acquirers in the notification
of a proposed acquisition of a qualifying holding in an
investment firm. The proposed acquirer will be required
to submit information, including the identity of acquirer
and any persons that will effectively direct the business
of the target entity, details of the acquisition and its
financing and the new proposed group structure and
its impact on supervision.
Commission Implementing Regulation 2017/1944
ITS concerning the notification of a proposed acquisition
of a qualifying holding in investment firms. The ITS were
developed by the Commission under Article 10a(8) of
MiFID and Article 12(9) of MiFID II. They lay down the
standard forms, templates and procedures for the
exchange of information between the competent
authorities of the target and proposed acquirer.
All of the four Regulations listed above entered into force
on 15 November 2017.
European Commission Equivalence Decisions
In December 2017, the Commission published two
equivalence decisions to ensure that businesses and
markets could continue to operate smoothly and without
disruptions after 3 January 2018, when MiFID II and MiFIR
On 5 December 2017, the European Commission
adopted an Implementing Decision on the equivalence
of the legal and supervisory frameworks applicable to
designated contract markets (DSMs) and swap
execution facilities (SEFs) in the US under Article 28(4)
of MiFIR. The legal and supervisory framework of the
US applicable to DSMs and SEFs was considered by the
Commission to be equivalent to the requirements laid
down in MiFIR for trading venues. The EU Decision was
published in the OJ on 6 December 2017 and entered
into force on the next day.
The joint statement (Statement) issued by the European
Commission and the US Commodity Futures Trading
Commission (CFTC) explains that the US Decision allows
EU counterparties to trade derivative instruments that are
subject to the trading obligation on CFTC-authorized
DCMs and SEFs in the US. This decision does not affect
the ability of EU counterparties to continue to trade on
any CFTC-authorized SEF or DCM with respect to those
derivatives which are not subject to the EU’s trading
On 21 December 2017, the Commission adopted an
Implementing Decision on the equivalence of the legal and
supervisory framework applicable to stock exchanges in
Switzerland (Swiss Decision) in accordance with
Article 25(4)(a) of MiFID II. The Commission considered
the legal and supervisory framework applicable to stock
exchanges in Switzerland to be equivalent to the relevant
EU requirements. SIX Swiss Exchange AG and BX Swiss
AG are now considered equivalent to MiFID II regulated
markets. This EU Decision is of limited duration and will
expire on 31 December 2018 unless the Commission
extends it prior to that date.
The Commission also explained that Switzerland differs in
a number of ways from other jurisdictions that have been
granted equivalence. The scope of this decision is much
greater because the trading of Swiss shares in the EU
(and vice versa) is more widespread than with the other
jurisdictions that were recently recognized. As a result,
‘trading in Switzerland will have a bigger and more
immediate impact on the integrity of EU financial markets,
including regarding the prevention of market abuse’.
ESMA statement on delaying the implementation of LEIs
On 20 December 2017, ESMA published a statement on
the introduction of LEI requirements. The statement
postpones the full application of the rules for six months,
subject to certain conditions.
Under the rules introduced in MiFID II, EU investment
firms will be prohibited from providing certain services to
clients until the LEI code for that client has been obtained
by the client. Similarly, EU trading venues will have to
identify every issuer of financial instruments traded on
them with an LEI code. In order to support the smooth
introduction of the LEI requirements, ESMA is going to
allow investment firms and trading venues to comply with
a lighter set of requirements for a period of six months.
Investment firms will be able to provide services to clients
without LEIs if they obtain the necessary documents from
those clients to apply for an LEI code on their behalf, and
the trading venues will be allowed to report their own LEI
codes instead of LEI codes of non-EU issuers currently not
having their own LEI codes.
To put these temporary arrangements in place, the FCA is
required to change a validation rule in its transaction
reporting system. In its response to ESMA’s statement, the
FCA explained that it will make the required amendments
as soon as possible, but was not able to do so before
3 January 2018, the date the requirements began to apply.
Delegated Regulation under MiFIR relating to trading obligation for derivatives
On 22 December 2017, Commission Delegated Regulation 2017/2417 supplementing MiFIR with regard
to RTS on the trading obligation for certain derivatives
was published in the OJ.
Article 28 of MiFIR introduces a trading obligation for
derivatives. It requires that derivative contracts which
are subject to the trading obligation may only be traded
on a regulated market, multilateral trading facility,
organized trading facility or third-country trading
venue deemed to be equivalent by the Commission.
Article 32(1) of MiFIR required ESMA to develop RTS
specifying the derivatives that should be subject to the
trading obligation and the date or dates from which this
trading obligation must take effect.
ESMA submitted the draft RTS to the Commission in
September 2017, which adopted the RTS in a Delegated Regulation on 17 November 2017, listing the relevant
derivatives in its Annex. Neither the European Parliament
nor the Council of the EU raised objections to the
Delegated Regulation, which entered into force on
23 December 2017.
ESMA consults on systematic internalizers’ quote obligations
On 9 November 2017, ESMA published a consultation paper on the proposed amendment of article 10 of
Delegated Regulation 2017/587 (RTS 1). The consultation
paper also addressed some other amendments to RTS 1
to enable a more consistent and unambiguous application
of its provisions.
ESMA was required under article 14(7) of MiFIR to draft
RTS to specify, with regard to the quoting obligation for
SIs, ‘the determination of whether prices reflect prevailing
market conditions’. ESMA’s draft RTS were endorsed by
the Commission and published in the OJ in March 2017.
ESMA later considered whether SIs’ quotes ‘should under
certain circumstances reflect the same minimum price
increments as orders and quotes submitted to trading
venues trading for the same financial instrument’.
ESMA took the view that, in order to ensure that SIs’
quotes adequately reflect prevailing market conditions,
it may be necessary to link them to the minimum tick sizes
applicable to trading venues.
The consultation closed on 25 January 2018, and ESMA
intends to use the input from stakeholders to finalize the
amendments to RTS 1.
UK implementation of MiFID II
FCA published position limits for commodity derivative contracts
On 18 October 2017, the FCA published a webpage
containing position limits for commodity derivatives.
The FCA is required under MiFID II to set limits on the
maximum size of positions held by a person together with
those held on its behalf at an aggregate group level.
The webpage lists some of the commodity derivative
contracts which the FCA has identified as trading on a
UK trading venue, including the entries for bespoke
contracts and de minimis aggregated contracts.
The position limits apply as of 3 January 2018. The FCA
notes that these may be revised if it decides it is necessary
to do so or as a result of an ESMA Opinion.
FCA ‘Dear CEO’ letter on payment for order
On 13 December 2017, the FCA published a ‘Dear CEO’ letter regarding the Payment for Order Flow (PFOF),
which follows the publication of the FCA Market Watch
51 on PFOF in September 2016.
In the letter, the FCA expressed its view that the practice
of brokers demanding ‘payments from counterparties as a
condition for conducting client business with them
substantially undermines a broker’s ability to act as a
good agent’. It also repeated its concerns that PFOF
- Bad for markets
- Undermine the transparency and efficiency of price
- Inhibit competition; and
- Lead to poor outcomes for end clients
The FCA further stated that firms continuing to charge
PFOF will be in breach of MiFID II standards and
highlighted that action had to be taken in order to
The market intelligence gathered by the FCA suggested
that some brokers were designing structures to avoid the
rules introduced by MiFID II and provided examples of
such structures. The FCA stated that ‘[t]his will be a
priority area of supervisory focus after January’ and
warned against any attempts to circumvent the
requirements. Furthermore, the FCA stated that any
market makers offered to enter into arrangements that
attempt to avoid complying with the rules should not
only decline to do so but also notify the FCA of
MiFID II – Implementation status of member states
For reference, we have included a table setting out the
implementation position for MiFID II in our key European
jurisdictions. If you require any additional information on
those countries listed below please refer to your local
DLA Piper contact below.
||Denmark has, since 3 January 2018, implemented MiFID II through the Capital
Markets Act (in Danish: lov om kapitalmarkeder), the Financial Business
Act (in Danish: lov om finansiel virksomhed) and the Financial Advisors Act
(in Danish: lov om finansielle rådgivere og boligkreditformidlere).
Finland has implemented MiFID II/MiFIR into Finnish law by amending the Investment
Services Act through the Law on amendments of Investment Services Act (Fi: Laki
sijoituspalvelulain muuttamisesta, 1069/2017) and by repealing the current Act on
Trading in Financial Instruments and enacting a new act by the same name (Act on
Trading in Financial Instruments (Fi: Laki kaupankäynnistä rahoitusvälineillä 1070/2017).
Both laws entered into force on 3 January 2018. In connection with these, many
financial market and financial product laws were revised technically to reflect the
changes to the above mentioned acts.
||MiFID II has been implemented into French law via (i) Ordonnance no 2016–827
of 23 June 2016 and Ordonnance no 2017–1107 of 22 June 2017 and (ii) Décrets
(Decrees) no. 2017–1253 and no. 2017–1324.
||MiFID II has been implemented in full into German law via the Zweites Gesetz
zur Novellierung von Finanzmarktvorschriften auf Grund europäischer Rechtsakte
(Zweites Finanzmarktnovellierungsgesetz – 2. FiMaNoG) dated 23 June 2017.
||MiFID II has not yet been implemented in Greece. The relevant draft law was
submitted for discussion before the Greek Parliament on 14 December 2017.
||Implementation is almost completed. The Italian Financial Act (Legislative Decree no. 58
of 1998) has been amended by Legislative Decree no. 129 of 3 August 2017 in order
to implement the main provisions of MiFID II. The new provisions are effective as of 3
January 2018. In addition, Consob has launched and completed a series of consultations
in relation to the adoption of the MiFID II’s level 2 measures such as passporting,
conduct rules and investor protection. The final version of those MiFID II’s level 2
measures are expected to be enacted and published shortly. Other level 2 measures
(such as those concerning market exchanges and trading venues) have already been
implemented (eg by the adoption of the new Consob Regulation no. 20249 of 28
December 2017 on ‘Market Exchanges’).
||Bill no. 7157 on markets in financial instruments has been submitted with the
Luxembourg Chamber of Deputies on 3 July 2017 in order to implement MiFID II
into Luxembourg law, but has not yet been adopted. The Luxembourg Supervision
Commission of the Financial Sector noted in its press release 17/47 (on the application
of MiFID II/MiFIR in the Grand Duchy of Luxembourg as of 3 January 2018) that
irrespective of the fact that the new law has not been passed yet, the MiFIR provisions
are binding and directly applicable in Luxembourg from 3 January 2018 by virtue
of Article 288 of the Treaty on the Functioning of the European Union (except the
provisions of Article 37 of MiFIR which shall apply from 3 January 2020). Furthermore,
the more protective provisions of MiFID II which confer new rights or are more
favourable than the applicable national rules and regulations shall also apply from
3 January 2018 and existing legal provisions shall be interpreted accordingly.
The Netherlands has implemented MiFID II via three separate laws that amend
the Dutch Financial Supervision Act (Wet op het financieel toezicht) and ancillary
laws. The laws became effective on 3 January 2018 and are listed below:
- Implementing Act MiFID II (Wet implementatie richtlijn markten voor
financiële instrumenten 2014)
- Implementing Decree MiFID II (Besluit implementatie richtlijn markten voor
financiële instrumenten 2014); and
- The Regulation competence employees investment firms (Regeling
vakbekwaamheid medewerkers beleggingsondernemingen Wft)
||New temporary regulations incorporating MiFID II and MiFIR entered into force
as of 1 January 2018. Note that these are temporary regulations (level 2) and
Norway is, as of 24 November 2018, still in a legislative process in respect of
implementing MiFID II and MiFIR. The temporary regulations will be replaced at a
later stage and the way it is implemented into Norwegian law will differ from the
temporary regulations adopted so far.
MiFID II has been implemented in Portugal through Law no. 16/2015, of
24 February 2015, on collective investment schemes, Law no.18/2015,
of 4 March 2015, on private equity firms, social entrepreneurship and
specialized investment, and Decree-Law no. 124/2015, of 7 July 2015, amending
the Portuguese Securities Code and the Legal Framework of Pension Funds.
The new legislation has already come into force.
The CMVM is in regular contact with the compliance departments of the
main market participants with respect to the importance of implementation.
Full implementation of the Directive’s requirements by market participants
remains a work in progress and CMVM are in email contact with smaller
participants asking for status of implementation.
Spain has, since 30 December 2017, partially implemented MiFID II with regards to
certain aspects on the legal regime of Spanish trading venues (regulated markets,
MTFs and OTFs) through Royal Decree-Law 21/2017, of 29 December 2017, on
urgent measures for the adaptation of Spanish law to the EU rules on securities
Royal Decree-Law 21/2017 came into force on 3 January 2018. The remaining
aspects of MiFID II have not been implemented as of 10 January 2018.
Sweden has, as of 3 January 2018, implemented MiFID II by amending the Swedish
Securities Markets Act, (Sw. Lag (2007:528) om Värdepappersmarknaden).
The Swedish Financial Supervisory Authority has issued new regulations to
implement the delegated directive, Finansinspektionen’s regulations regarding
investment services and activities (Sw. Finansinspektionens föreskrifter om
värdepappersrörelse, FFFS 2017:2), which replaces the old FFFS 2007:16 with the
The Swedish FSA also amended the Regulations governing operations on trading
venues (Sw. Föreskrifter om verksamhet på marknadsplatser, FFFS 2007:17) to
support the implementation of MiFIR. Both FSA regulations entered into force on
3 January 2018. Furthermore, the Swedish FSA has reported that it will comply
with ESMA Guidelines and that it considers ESMA Guidelines as general guidelines.
||Implemented into UK law on 3 January 2018 through a variety of pieces of
implementing legislation (see above).