MiFID (Markets in
Financial Instruments Directive) is the Directive 2004/39/EC of the European
Parliament and Council on markets in financial instruments which came into
force in Member States and states of the European Economic Area on November 1,
2007, replacing the previous ISD (Investment Services Directive) Directive.
MiFID regulates the provision of financial
services by Credit Institutions and Investment Firms. Its main objective is to
enhance the single European financial marketplace, improve competition between
the countries of the European Union and offer greater protection to investors.
This new Directive has been incorporated to the
Cyprus legislation through the Investment Services and Activities and Regulated
Markets Law of 2007 (Law 144(I)/2007). To whom does MiFID apply? MiFID applies to the following providers of financial services: - Investment Firms
- Regulated Markets
- Credit Institutions (Banks, Co-operative societies)
What investment services & activities does MiFID cover? MiFID covers the following core investment services & activities: - Reception & Transmission of orders
- Executions of Orders
- Dealing on own account
- Portfolio Management
- Investment advice
- Underwriting & placing with or without a firm commitment
- Operation of Multilateral Trading Facilities (MTF)
What investment products is MiFID concerned with? MiFID is concerned with the following investment products: - Transferable securities (stocks, bonds, rights, etc)
- Derivatives (options, futures, swaps, warrants etc)
- Mutual Funds
- Financial Contracts for Difference
- Derivative instruments for credit risk transfer
What benefits do investors derive from MiFID? Under MiFID investors
enjoy greater transparency and protection. The most important benefits for an
investor are:
- Client
categorization into three distinct
categories, "eligible counterparties", professional clients or
retail clients, with increasing levels of protection
- Evaluation of
suitability and appropriateness of the provision of financial services to
investors, ensuring that:
- the financial risk
of a service matches the investor’s financial position; and
- the complexity of a
service matches the investor’s knowledge & experience
- Best execution of
orders; there are particular requirements on investment services firms to
be able to prove that they have dealt in the best market and at the best
terms for their clients
- Better reporting: there are new
requirements on how investment firms report on transactions and progress
to their clients
- Client order
handling; there are specific requirements relating to the information that
needs to be captured when accepting client orders, ensuring that a firm is
acting in a client's best interests, and as to how orders from different
clients may be aggregated
- Pre-trade and Post-trade
transparency; there are particular requirements on market operators
and/or investment firms relating to the information that needs to be
published pre- and post-trade
- EU passport; EU-wide service
from their investment services company on the basis of the regulations in
force in their home country.
How will MiFID affect Global Capital’s Clients?
- Global Capital
Securities and Financial Services Ltd has always aimed at offering its
clients the highest standard of services and maximum protection. We are
therefore very positive about MiFID’s requirements and are in full
compliance with them.
- Another positive
aspect of MiFID is that the requirement to improve the information that we
hold about our clients and their affairs, will help us develop more useful
services and products for them, a capability which we intend to explore.
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