The Markets in Financial Instruments Directive (MiFID)
The Markets in Financial Instruments Directive (MiFID) is a European Union law that provides harmonised regulation for investment services across the EEA member states.
The main objectives of the Directive are to increase competition and consumer protection in investment services.
As of the effective date, 1 November 2007, it replaced the Investment Services Directive. MiFID is the cornerstone of the European Commission's Financial Services Action Plan whose 42 measures will significantly change how the EU's financial service markets operate. MiFID is the most significant piece of legislation introduced under the 'Lamfalussy' procedure designed to accelerate the adopting of legislation based on a four-level approach recommended by the 'Committee of Wise Men' chaired by Baron Alexandre Lamfalussy.
There are three other 'Lamfalussy Directives':
- the Prospectus Directive;
- the Market Abuse Directive;
- the Transparency Directive.
Not all firms are affected by MiFID. MiFID distinguishes between "investment services and activities" and "ancillary services".
If a firm performs investment services and activities, it is subject to MiFID in respect both of these and also of ancillary services, however if a firm only performs ancillary services, it is not subject to MiFID.
MiFID covers almost all tradable financial products with the exception of certain foreign exchange trades. This includes commodity and other derivatives such as freight, climate and carbon derivatives, which were not covered by ISD. That part of a firm's business that is not covered by the above is not subject to MiFID.