After about three years of negotiations, governments and the European Parliament have reached an agreement on the new rules that update the directive on markets in financial instruments. For the first time, limits will be placed on high-frequency trading and commodity derivatives trading.
The objective of the new Mifid rules is to close the real holes in the regulation of the financial markets made increasingly large by technological innovation and hyper-speculative practices. They will apply to investment firms, market participants and post-trade services. These are two different pieces of legislation, a directive on transparency and access to trading venues and a directive on authorizations and organization of venues and investor protection
All financial instrument trading systems must operate as 'regulated markets' such as stock exchanges, multilateral facilities such as Nyse Euronext or organized trading facilities. Trading in the latter will be restricted to non-equity instruments such as bond interest, structured finance products, issues or derivatives. It will be ensured that investment firms trade in organized venues
Under the new rules, investment firms have a duty to act in the interests of clients and this includes the obligation to design investment products for specific client groups according to their needs by withdrawing toxic products from trading and ensuring that any information market is clearly identifiable and is not misleading. Furthermore, clients must be informed whether the information received and advice are independent or not and whether they have been informed of the risks associated with the proposed investments.
