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Compliance, Ethics & Behavioral Finance·Regulatory Primer
MiFID II: What it Actually Requires
10 min read
The EU's investment-services rulebook
MiFID II (Markets in Financial Instruments Directive II) is the EU's comprehensive framework for investment services, in force since January 2018. It updated the original 2007 MiFID with significantly broader transparency, reporting, best-execution, research-unbundling, and product-governance requirements. Every European investment firm operates under it; many global firms apply MiFID II standards globally for consistency.
| Pillar | Requirement | Practical effect |
|---|---|---|
| Best execution | All sufficient steps for best total result | Quarterly RTS 28 reports per asset class |
| Transparency | Pre/post-trade transparency for all instruments | Equity-style transparency extended to bonds, derivatives |
| Research | Pay for research separately from execution | Research budgets shrunk; coverage of small caps fell |
| Reporting | T+1 transaction reports, 65 fields each | Significant infra build-out for reporting firms |
| Inducements | Tight rules on commissions for advisers | Independent advisers can't take fund kickbacks |
Note
Reg NMS is the US analogue
In the US, Regulation National Market System (Reg NMS, 2005) governs equity market structure — most notably the Order Protection Rule, which requires orders to route to the venue posting the best displayed price.