The abbreviation MiFID stands for Markets in Financial Instruments Directives. The most important goal of this new regulation, which was created by the member states of the European Union, is to establish confidence, especially among small investors, in the financial markets, which was severely affected by the international crisis in 2008/2009.

The initiators of MiFID II want to achieve this by introducing new regulations to ensure greater transparency in securities trading. At the same time, the law is intended to improve investor protection and increase competition and market efficiency. Many experts had expected in advance that the extensive new trading regulations would lead to turbulence after they came into force. But the feared chaos on the securities markets failed to materialize.

More transparency through regular reporting

MiFID II applies to all consumers and companies that are resident in a country of the European Economic Area and active on the securities market. Both private and corporate customers will benefit significantly from the regulations, which came into force in the first week of January.

MiFID II requires that investors receive reports in a standardized form at regular intervals to keep them up to date on the performance of their investments in how to trade stock and the costs incurred for them. Specifically, these are the following reports that bank customers receive:

    the annual cost report, which lists all transaction costs and fees, such as fund costs or trading venue fees.
    the quarterly securities account statement, which informs investors about the current status of the securities they hold in the form of a list of all investments valued at closing prices.
    the loss threshold report, which is an automatic notification. It is sent by mail or posted in the online archive as soon as the loss threshold for derivatives such as certificates or warrants is reached. The first loss threshold is ten percent, followed by each additional ten percent.

Banks is also implementing the obligation imposed by MiFID II to fully inform its customers of all costs incurred by the investments they make. This includes:

    the ex ante cost disclosure, which lists in advance all costs likely to be incurred and the resulting reductions in return.
    the cost disclosure in a standardized form for different types of securities.
    the publication of the top five trading venues, rated on the basis of trading volume and execution quality.

Conclusion:

    MiFID II regulations lead to more transparency in terms of performance and costs related to an investment
    The obligation to identify makes anonymous trading much more difficult