What is MiFIR

Markets in Financial Instruments Regulation or MiFIR, is a European law which demands its member states to comply with its regulations. As a result of the last financial crisis, the need for a European Union wide regulation called for the emergence of MiFIR. This regulation was formed with the intent to not only protect the markets, but also the investors.

MiFIR’s modules are uniformly applicable to all member states of the European Union. This uniformity stops each member state from coming up with a different reporting format. Now businesses can offer their reporting services across all EU member states with the homogenization of transaction reporting format. Since most brokers have an obligation to do more than one reporting, it saves substantial resources and time.

MiFIR is the new regulation that states not just regulated entities but also defines type of individuals permitted to enter the European market. Thus it succeeds in capturing all the participants of the market irrespective of their geographic location.

The regulation was initiated to establish more transparent and secure financial system by augmenting regulatory requirements, investor protection, and market transparency. MiFIR provides investor protection and decreases the risk of market disorder and systemic risk

In addition to this, the MiFIR puts forth reporting requirements about the disclosure of trade data to competitive authorities and the public. In terms of reporting content and scope, the new MiFIR reporting requirements will be more stringent, as it replaces the build on the requirements of the prevailing MiFID transaction reporting. The reporting obligations of MiFIR will come into effect from the month of January 2018.

The Scope of MiFIR

The scope of MiFIR envelopes the European Securities markets, investment companies, third-party country firms, data providers, and commodity firms. It has also brought about a remarkable expansion to the required type of data and the range of reporting.

For instance:

• There should be a report on all derivatives trading in regulated markets; this includes the foreign exchange (FX), commodity, over the counter (OTC), and the previously exempted interest rate.

• There should be a report about all instruments traded on Organized Trading Facilities (OTFs) and Multilateral Trading Facilities (MTFs) that significantly increases the number of cash instruments involved.

• A report on any instrument that may have impacted the value of instruments traded on a trading venue.

• All the reports should include the names of individual traders executing the transaction or the algorithms used, and mention if the trade is short selling. 

Since MiFIR is an EU regulation, the European Securities and Markets Authority (ESMA) will shoulder the publication and monitoring of information. MiFIR and MiFID II help ESMA to draft a good number of implementing technical standards (ITS) and regulatory technical standards. Once the rules in the draft technical standards are executed, it will move a significant part of OTC trading onto regulated platforms and bring most of the non-equity products under the purview of the powerful regulatory regime.