what is the markets in financial instruments directive mifid 
the markets in financial instruments directive mifid is a european regulation that increases the transparency across the european union s financial markets and standardizes the regulatory disclosures required for firms operating there mifid implemented new measures such as pre and post trade transparency requirements and set out the standards of conduct to be followed by financial firms mifid has a defined scope that primarily focuses on stocks the directive was drafted in 2004 and has been in force across the european union eu since 2007 mifid was replaced by mifid ii in 2018 understanding the markets in financial instruments directive mifid the stated aim of mifid is for all eu members to share a common robust regulatory framework that protects investors mifid came into effect a year before the 2008 financial crisis but changes were made following it that took shape in mifid ii one issue in the original drafts was that the regulatory approach in dealing with countries outside of the european union was left up to each member state this meant that some firms outside of the eu could have a competitive advantage over firms inside the union because of the easier regulatory oversight this issue was addressed through mifid ii implemented in january 2018 which harmonized the rules for all firms with eu clients mifid focused primarily on stocks which was seen as a limitation because it did not include the vast amount of financial products available in the market such as over the counter otc derivatives otc transactions are done between two parties without any exchange in the middle to act as a supervisor as a result there was less regulatory oversight and transparency for the parties engaging in an otc trade implementing mifid ii brought many more financial products under its purview the markets in financial instruments regulation mifir works in conjunction with mifid and mifid ii as a regulation rather than a directive to extend the codes of conduct beyond stocks to other types of assets the european union began enforcing the markets in crypto asset regulation mica in july 2023 which complements the 2022 mifid ii amendment that added crypto assets regulation 2022 858 12client classifications under the mifidone of the key aspects of mifid is the classification of clients into specific client types there are three client types professional clients retail clients and eligible counterparties the goal for the classifications is that the regulatory protection for the clients should reflect the different levels of risks for each client type the idea is that different types of clients or investors will have different levels of financial knowledge and should be given different levels of protection when dealing with a financial body such as a bank eligible counterparties are provided the least protection and retail clients are provided the highest depending on the client type they are provided with different levels of information necessary for their understanding of the specific risks overall explanations and details of that transaction european union regulatory harmonizationmifid is just one part of the regulatory changes sweeping the eu and impacting the financial firms compliance departments e g insurers mutual fund providers and banks operating there taken together with other regulatory initiatives like the general data protection regulation gdpr and mifir the eu is following through on its vision of a transparent market with clear rights and protections for eu citizens as with any regulatory framework many rules are tweaks to existing regulations such as the requirements for disclosure where a conflict of interest exists however several best practices like appointing a single officer to protect client interests from inside the firm are now explicit requirements for firms that want to access the eu market mifid iiin 2018 the european commission enacted a revised directive called mifid ii first proposed in 2012 the revised directive was intended to restore confidence in the markets following the 2008 market crash while mifid was limited to equity stocks mifid ii extended the requirements to issuers of all types of securities including debt securities derivatives and structured instruments the new regulation enhanced the transparency and reporting requirements of securities trades reducing the use of dark pools and otc trading it also extended investor protection for all types of securities trades whether the investor was located inside or outside of the european union in 2022 mifid ii was amended to include tokenized securities crypto assets and other distributed ledger based instruments 2