How MiFID I Has Improved Confidence in Financial Markets

Due to various market abuse that has occurred across the globe, the reputation of the markets and investor confidence has depleted in previous years. As a response to this, global regulators have introduced a number of regulatory initiatives and penalties to combat fraudulent practices within the industry. These regulatory initiatives include MiFID I, MAR and Dodd-Frank. MiFID (Markets In Financial Instruments Directive) was implemented in the European Union in 2007, and it increases transparency across EU financial markets, helping to standardize regulatory disclosures of markets within the European Union. As a whole, MiFID defined a scope focused on over the counter transactions in the EU. Here, we’re taking a closer look at the Markets In Financial Instruments Directive, the impact it has had on improving confidence in the financial markets and what changes MiFID II (set to be introduced in January 2018) will seek to achieve.

Regulatory Framework

The entire concept behind MiFID is for EU members to have a robust and common framework, in order to help ensure that any investors in the company are protected. While MiFID was initially introduced before the 2008 financial crisis, a number of changes were put in place as a result of the crisis in order to ensure that regulations were put in place to stop this from happening again. MiFID is impacting compliance departments of all financial firms, including banks, insurers, mutual fund providers and more that are operating in the European Union. Now, the next major initiative, MiFID II, will be introduced in 2018 and this could provide a number of other positives when it comes to improving confidence in global financial markets.

Risk Reduction

Managing risk is imperative in all trade markets, and MiFID II could ultimately help market participants to improve their risk management and ultimately help to reduce costs. This is carried out through the use of various technological solutions which offer advanced surveillance and compliance features, to help control risk. An example of this would be NEX Optimisation, who are positioned to capitalize on the complexity of regulation. The business has analyse the trade lifecycle and created (or acquired) a suite of financial technology solutions to help market participants better optimise their portfolios, reconcile, report, and ultimately reduce risks and costs. These platforms also offer regulatory regime specific solutions, to ensure trading continues while remaining compliant under the new MiFID II regulations when they are introduced in January 2018.

Improvement in Opportunities

Due to the dwindling time period for businesses to implement the various changes to meet the new compliance and regulations MiFID II will introduce, there is immense pressure for businesses to deliver the best returns for their investors. While this could be causing trouble for financial institutions, internal and external pressures can ultimately be seen as important opportunities for improvement when it comes to the quality of returns they are providing their investors. This is helping to improve confidence in financial markets as they are having to offer greater efficiency and transparency to their investors across all markets.

Confidence in financial markets is imperative around the globe, small business owners to large banks are set to consider the state of the markets when considering any form of investment. MiFID II is likely to provide more stability and greater opportunities for return on investment in the global markets, improving transparency and ultimately further improving confidence within the financial markets as a whole. 

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11 Sep 2017