MiFIR / MiFID II Compliance: EU Markets in Financial Instruments
Directive 2014/65/EU and Regulation 600/2014 have governed EU trading since 3 January 2018, delivering stricter investor-protection, transparency and reporting rules. The 2024 review package (MiFID III / MiFIR 2 – Reg 2024/791) introduces an EU-wide consolidated tape, a ban on payment-for-order-flow (PFOF) and a single-volume-cap, taking effect from late 2025 / early 2026.
What are MiFID II and MiFIR?
The Markets in Financial Instruments Directive (MiFID II) and its directly applicable sister law, MiFIR, form a single rule-set for EU trading venues, investment firms and systematic internalisers. Together they extend pre- and post-trade transparency to equities, bonds and derivatives; require firms to submit 65-field transaction reports to regulators under MiFIR Article 26; enforce stringent product-governance, inducement and research-unbundling standards to protect investors; mandate the publication of best-execution metrics (RTS 27/28); and oblige most trades to take place on regulated markets, MTFs, OTFs or systematic internalisers. A further package adopted in 2024 will add a compulsory EU consolidated tape and eliminate payment-for-order-flow incentives to bolster market integrity.
Features of MiFID II/ MiFIR
The MiFID II / MiFIR regulation explores various facets of compliance within the financial markets:
Enhanced Market Transparency and Integrity
The measures involve requirements for pre- and post-trade transparency, rules on trading venues and systematic internalisers, and increased supervisory powers for regulators. The framework is also aimed at preventing market abuse and promoting fair and effective competition between different types of trading venues. MiFID II/MiFIR is a significant overhaul of the original MiFID legislation, reflecting changes in the trading environment since the financial crisis.
Improved Investor Protection
MiFID II/MiFIR are regulatory frameworks in the European Union that aim to provide greater transparency and protection for investors . They have introduced new rules on the provision of investment services and activities by banks and investment firms, including requirements for client classification, product governance and disclosure of costs and charges . These regulations also enhance the powers of national regulators and provide for the establishment of a single rulebook.
Stricter Rules on Trading Activities
MiFID II and MiFIR significantly tighten the rules on trading activities. These regulations mandate that firms must record all communications that may result in a transaction for at least five years. This includes electronic communications such as emails and instant messages, as well as phone calls. They also impose stricter controls on algorithmic trading and high-frequency trading, to minimize the risk of market abuse or manipulation.
Detailed Reporting Requirements for Transactions
The requirements mandate firms to report detailed and accurate information about their transactions to National Competent Authorities (NCAs) within a day of the transaction.
This includes all financial instruments traded on a regulated market, an MTF or an OTF, and any financial instruments where the underlying is a financial instrument traded on a regulated market .
Regulation of Financial Market Infrastructures
MiFID II (Markets in Financial Instruments Directive II) and MiFIR (Markets in Financial Instruments Regulation) are EU legislations that regulate firms providing services linked to financial instruments and the venues where those instruments are traded. These legislations aim to increase transparency, standardize the regulatory disclosures required for specific markets, and shift trading towards regulated platforms.
Implications of MiFID II/ MiFIR
Firms must upgrade reporting systems to XML ISO 20022, map consolidated-tape contributions, rewrite product-governance files and remove PFOF arrangements before the MiFID III go-live. Expect NCAs to scrutinise best-execution metrics and transparency waivers in 2025 supervisory reviews.
.png)
Grand: Enhancing MiFID II/ MiFIR Compliance
-p-1080.png)
-p-1080.png)
-p-1080.png)
-p-1080.png)
.png)
How Grand Helps
Each module in Grand.io's GRC software suite plays a pivotal role in ensuring comprehensive compliance with the MiFID II/MiFIR regulation, addressing specific aspects like market transparency, investor protection, trading activities, detailed transaction reporting, and the regulation of financial market infrastructures.
Frequently Asked Questions
To align your transparency reporting with the MiFID II/MiFIR requirements, you need to focus on several key areas. Firstly, ensure your reporting covers OTC derivative contracts and the clearing process through central counterparties, as this is key to improving the safety and transparency of OTC derivatives markets.
Secondly, harmonize your transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market. This is to improve transparency of financial markets for market participants and regulators. Lastly, consider the regulation's focus on new forms of algorithmic trading and the importance of increasing the powers of regulators for better investor protection.
To meet MiFID II/MiFIR investor protection rules, firms must take several steps. First, firms need to ensure they provide clear, comprehensive and understandable information about financial products and services to clients . Second, they must undertake and document a suitability assessment for each client to verify that the products being sold align with the client's financial situation, investment objectives, and risk tolerance.
Third, firms need to establish and implement robust governance arrangements and internal procedures, including a compliance function, to ensure they meet the regulatory requirements . Lastly, firms are required to regularly review and update their policies and practices to ensure continued compliance with the evolving regulations .
A single EU feed of equity & bond prices/trades, operated by licensed providers from 2025-26.
Payment-for-order-flow is prohibited 30 months after Reg 2024/791 enters into force—expected Q4 2026.
