Risk glossary
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The Markets in Financial InstrumentsRegulation accompanies the European Union’s second Markets in Financial Instruments Directive orMifid II. As Mifir is a regulation, it applies directly to EU member states. This is in contrast to a directive, which member states have to transpose into national law and can modify to a limited extent provided the original intention of the directive is maintained.
Mifir enforces numerous obligations on firms in the European Economic Area including the requirement for firms to publicly disclose certain quotes and trades – known respectively as pre- and post-trade transparency.
Click here for articles on the Markets in Financial InstrumentsRegulation.
The Markets in Financial Instruments Regulation (MiFIR) is a significant regulatory framework within the European Union that complements the Markets in Financial Instruments Directive (MiFID II). MiFIR operates as a regulation, meaning it is directly applicable across all EU member states without the need for transposition into national law. In contrast, MiFID II is a directive that requires member states to adopt it into their national legal frameworks, allowing for some flexibility in implementation while maintaining the directive's original objectives.
One of the key distinctions of MiFIR is its imposition of various obligations on firms operating within the European Economic Area (EEA). These obligations encompass aspects such as the mandatory public disclosure of specific quotes and trades. Pre-trade transparency involves the disclosure of certain trade intentions before they are executed, while post-trade transparency necessitates the public reporting of executed trades. These measures aim to enhance transparency and oversight in financial markets, promoting fair and efficient trading practices.
In understanding MiFIR, it's crucial to grasp the broader context of MiFID II and its goals. MiFID II aims to strengthen investor protection, increase market transparency, and standardize regulatory practices across the EU financial landscape. By extension, MiFIR plays a pivotal role in ensuring the enforcement of these objectives by setting out detailed rules and requirements for market participants.
To elaborate on some related concepts:
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Regulation vs. Directive: Understanding the difference between regulations (directly applicable laws across member states) and directives (legislative acts that require member states to achieve specific goals through their own laws) is fundamental in comprehending how MiFIR and MiFID II operate.
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Pre-trade and Post-trade Transparency: These concepts refer to the disclosure requirements for trade intentions before execution (pre-trade) and the reporting of executed trades (post-trade) to promote market visibility and fairness.
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European Economic Area (EEA): Comprising EU member states and certain non-EU countries, the EEA facilitates the free movement of goods, services, capital, and persons within its territory, with shared regulations, including financial directives and regulations like MiFIR.
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Market Oversight and Investor Protection: Both MiFID II and MiFIR aim to ensure fair, efficient, and transparent markets while safeguarding investor interests through stringent regulatory measures.
By comprehending these key concepts and their interplay within the financial regulatory landscape, stakeholders can navigate and comply with the intricate requirements set forth by MiFIR and MiFID II in the EU.
