MiFID 2: "​IN SCOPE"​ AND "OUT OF THE SCOPE"​ (2024)

About the author: Kevin Pramanik is highly experienced & passionate banking, finance & management professional with expertise in MiFID II.

The Markets in Financial Instruments Directive II (MiFID II) is the framework of European Union (EU) legislation, an extended version of the original MiFID I, focusing on trading activities like OTC Derivatives trading, Commodity Derivatives trading, Vanilla Asset Class trading or any other trading or investment related activities etc. Unlike MiFID I, which was focused to cash equity and bond related asset classes, the scope of the MiFID II directive has been extended to all sort of asset classes, derivatives and structured products with more robust pre-post-reporting requirements and controls.

Investment intermediaries (Investment Bank, Asset Management, Wealth Management, Investment Management, Private Bank, Brokers and Hedge Fund) providing services to clients in relation to equity shares, bonds, funds, fixed income, commodities, structured products and derivatives instruments through various investment schemes will be impacted by MiFID II.

This article will provide high-level In scope and Out of the scope of MiFID 2 regulatory requirements.

In scope:

1. Any bank or financial institutions or commodity houses or trading houses or individual, who is involved in trading or financial transaction activities or investment services with EU member countries.

2. It span across all asset classes, structured products, derivatives products, insurance linked products etc. The high-level list is given below.

• Transferable securities.

• Money-market instruments.

• Options, Futures, Swaps, Forward Rate Agreement, Currencies, Commodities, Emission allowances, Inflation linked products.

• Any sort of simple or complex derivatives transactions and instrument.

• Financial contracts including cash transaction.

• Shares, Bonds, Deposits, any securitised debts, any sort of transferable securities.

• Physically settled commodity derivatives product

3. Following investment services and activities are in scope of MiFID II.

• Reception and transmission of orders in relation to one or more financial instruments.

• Execution of orders on behalf of clients.

• Dealing on own account

• Portfolio Management

• Investment advice

• Underwriting of financial instruments and /or placing of financial instruments on firm commitment basis.

• Algorithmic trading

• Operation of an MTF (Multilateral Trading Facility)

• Operation of an OTF (Organised Trading Facility)

• Conditional Ancillary services like Safekeeping, Custodian services , Collateral Management services, Investment research & financial analysis services, M&A services, Capital structure & industrial strategy related services, underwriting services etc.

Out of the scope:

• Insurance and Reinsurance businesses

• Internal investment services like to subsidiaries and parent company

• Professional investors dealing with own account without algorithmic trading

• Investment services to employee participation scheme

• Some part of the Ancillary services, which are linked with internal company activities and own account trading.

• Providing investment services exclusively for the purpose of hedging commercial risks

• Company and investor outside of EU, who does not trade with EU countries and regulated by local law.

  See Also

  MiFIR vs. EMIR: Navigating Regulatory Reporting ChallengesMiFID II and Corporate Access: Here’s What Changed for IR teamsMiFID II / OverviewDo you know what MiFIDII means for American & Canadian firms?

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