European commodity players gear up for launch of MiFID
The EU Markets in Financial Instruments Directive (MiFID) comes into effect from 1st November.
MiFID replaces and expands upon the existing Investment Services Directive (ISD) and in effect is intended to create a single market for financial instruments across the 30 states of the European Economic Area (the EU 27 plus Iceland, Norway and Liechtenstein.)
Like the ISD, MiFID enables covered companies to provide investment services throughout the EEA on the basis of home member state authorisation (the so-called ‘passport’). However the scope of the passport is extended beyond the terms laid out in the ISD to cover a range of new investment activities, including commodity derivatives. This is expected to facilitate the entry of new participants in a number of European markets, particularly Italy, Spain and France.
Most firms falling within the scope of MiFID will also have to comply with the new Capital Requirements Directive (CRD) which will set conditions for the regulatory capital a firm must hold. Those firms newly covered by MiFID will be subject to directive-based capital requirements for the first time.
But although the directive is intended to harmonise financial trading arrangements across Europe, the reality in the near-term at least is somewhat more piecemeal. Each state was required to transpose the legislation into national law by 31st January this year, although only Britain, Ireland and Romania complied. Up to ten countries, including Spain, the Netherlands and the Czech Republic, have still not done so. GR
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