Glossary term
Markets in Financial Instruments Directive II (MiFID II)
Subject: Compliance and Regulation, Market Conduct and Securities
Also known as: MiFID 2, Directive 2014/65/EU
MiFID II is the European Union framework governing investment firms, trading venues and the sale of financial instruments, aimed at protecting investors and making markets more transparent. A companion regulation, MiFIR, sits beside it.
Explanation
MiFID II replaced the original 2007 directive and has applied since January 2018, together with a companion regulation, MiFIR. It covers who may provide investment services, how firms must treat clients, and how trading venues and prices are made visible. Its main themes are investor protection (suitability and appropriateness tests, clear cost disclosure, product governance), market structure (rules for exchanges, multilateral and organised trading platforms, and systematic internalisers), transparency before and after trades, best execution, and recording of phone calls and electronic messages. Firms outside the EU meet it through their EU clients or branches. The name is used loosely in the industry to mean the whole package of directive, regulation and technical standards. Any firm active in European markets feels it daily in how it sells, trades and keeps records.
Example
A wealth manager serving clients in the EU is asked to recommend a complex structured note. Under MiFID II, it first checks that the product matches the client's knowledge, goals and loss tolerance, discloses all costs in advance, and records the advice call. If the note's target market does not include the client, the adviser should not sell it to them.
Not to be confused with
- MiFIR
- MiFIR is the directly applicable regulation that sits beside the directive and covers trade transparency and reporting. MiFID II is the directive that member states transpose.