November 30, 2020

MiFID II/MiFIR was implemented almost three years ago and as expected, we are seeing a number of post-implementation reviews to identify any aspects that have not worked as expected and any unintended consequences.

Explore our insights and what this might mean for your firm.


The Markets in Financial Instruments Directive II (MiFID II) was the largest overhaul of financial services regulation of the decade. The directive impacts the entire investments lifecycle as it enhances and expands regulation of financial institutions within the European Economic Area (EEA) as well as those providing services cross-border.

MiFID II applies to those financial services businesses undertaking MiFID business anywhere in the EU as well as those providing services cross-border. This includes investment firms, trading venues, data reporting service providers and third country firms providing investment services or performing investment activities into the EU (either on a services basis or via a branch). MiFID II impacts all areas of Pershing and provides clients and particularly wealth managers with increased obligations.

The overarching aim of MiFID II/MiFIR was to “level the playing field in financial markets” by rectifying their inefficiencies, improving their functioning, and ensuring greater transparency and resilience.

MiFID II took effect from 3 January 2018.

MiFID II/MiFIR Reviews

With over two years after the implementation of MiFID II/MiFIR, ESMA is undertaking post-implementation reviews of the requirements. This will not be another ‘big bang’ implementation but instead is expected to be a staggered approach to focus on making changes to the pieces that have not worked as expected (costs & charges, product governance and research unbundling obligations) and also to fine tune third-country provisions (notably as the UK becomes a third country) and the transparency measures (the double volume cap, the SI regime, algorithmic trading, the trading obligation for derivatives, SME growth markets and the functioning of organised trading facilities (OTFs).

In addition to this, in October 2020 the European Commission (EC) was asked to present a proposal for a wide review of both MiFID II/MiFIR by 31 July 2021. Areas in scope include market structure, data, trading and post trading, research rules, inducements to advisors, client categorisation and Brexit.

Covid-19 ‘quick fix’

In July 2020, the EC issued a legislative proposal to amend specific requirements of MiFIR/MiFID II in light of the current Covid-19 pandemic, aiming to streamline regulatory requirements whilst allowing for more flexibility for wholesale clients. These proposals include the phasing-out of paper-based communication, exemptions from costs and charges disclosure for eligible counterparties and professional clients, and the suspension of best execution reports (RTS 27), amongst others.

The EC is looking to introduce these changes as ‘quick fixes’ to mitigate the effects of Covid-19 and is therefore driving for early application of the amendment. An application date of late 2020 or early 2021 has been given, but this may be optimistic. The proposal will now be subject to amendments by both the EU Parliament and the Council before approval, which we expect by the Autumn.

Pershing Comment - Linda Gibson, Director of Regulatory Change (October 2020)

The proposed amendments in the Covid-19 ‘quick fix’ are meant to recalibrate specific requirements. To ensure that retail clients receive a high-level of investor protection, the amendments adjust between retail clients, professional clients and eligible counterparties. While some of the changes cut across investor categories (e.g. the phase-out of paper based information), the majority of the proposed amendments focus on providing alleviations for professional clients and eligible counterparties. This point was made by the UK industry associations when responding to the EC’s consultation earlier this year calling for a more proportionate treatment of wholesale clients and information adapted to their needs.