MiFID II

New rules will come into force on the 3rd January 2018 and will affect anyone engaged in the dealing and processing of financial instruments within the European Union. SEB will ensure continuity and a smooth transition for all clients.

For clients, MiFID II regulation will mean:

  • increased transparency of financial markets,
  • a trading shift towards more regulated trading venues,
  • best execution transparency,
  • orderly trading behaviour and
  • costs transparency for trading and investing.

MiFID II and MiFIR: what does it mean?

The original Markets in Financial Instruments Directive (MiFID), introduced in 2004, led to a major shift in cash equity markets, removing barriers to cross-border financial services within Europe for a safer, more transparent and evenly balanced marketplace.

From 3rd January 2018, the requirements will be extended through the revision of the MiFID which is in two parts: an updated Directive (MiFID II) that requires each European Union (EU) member state to transpose into national laws, and a new regulation (MiFIR) that has a direct effect on all EU member states.

What are the key areas?

Investor Protection

All clients will be re-categorised according to three MiFID classifications – Retail, Professional or Eligible. Enhanced business conduct and governance requirements have been introduced on the subjects of suitability, conflicts and inducements, costs & charges and best execution.

Market Structure

Certain trading activity conducted outside of regulated trading venues will be required to move onto a regulated trading venue. Rules have been designed to separate client activity and a financial institution's trading on their own account through the introduction of a systematic internaliser' regime.

Transparency

Pre and post-trade transparency requirements have been extended beyond equity to include other asset classes such as bonds, derivatives and electronically-traded funds.

Trading Obligation

These obligations will apply to both equity and non-equity instruments. For equity trading, MiFID investment firms must ensure the transactions take place on a regulated market, a multilateral trading facility (MTF), an organised trading facility (OTF), with a systematic internaliser (SI) or on an equivalent third-country trading venue.  For non-equity trading, certain Interest Rate Swaps will also be required to be executed through trading venues by certain investment firms.

Execution Quality

MiFID investment firms will be required to disclose on an annual basis their five largest execution venues (in terms of trading volume). On a quarterly basis, execution quality data pursuant to the relevant instrument will be published at each execution venue's website.

Transaction Reporting

MiFID investment firms will be required to report additional data in conjunction with the transaction reporting to their national competent authorities. The additional data fields will include client and transactional identifiers on a wider scope of products. SEB will report to the Swedish national competent authority and financial regulator, Finansinspektionen.

As the MiFID II rule-making process continues, more information will be available on this page. (sebroup.com/mifid)

 

As Skandinaviska Enskilda Banken AB (publ) is a MiFID investment firm, we will inform clients of their assigned client categorisation and provide any applicable updated disclosures and agreements.