If you are buying or selling stocks, bonds, commodities, foreign exchange or exchange traded funds, then the investment landscape across the EU has just changed for the better.
The second Markets in Financial Instruments Directive – better known as Mifid II – is a massive legal rethink about the relationship between finance professionals, the markets and investors.
Mifid II touches almost every aspect of the investment activities carried out by banks, brokers and asset managers.
New rules start from January 3, II018, and demand more transparency for regulators and consumers, while promoting more competition for financial services.
The idea is to make investing more consumer-friendly.
Ironing out the bugs
Fund managers will have to divulge more information about their fees and investors will learn more about the execution of trades and the pricing of bonds and derivatives.
Market regulators will have better data to prevent ‘flash crashes’ and other sudden anomalies.
Although Mifid II is European legislation, banks and fund managers in the Us and Asia must abide by the rules if they buy or sell to consumers in the EU.
“Once the bugs are ironed out, Europe will emerge with a system much better suited to modern investing – arguably surpassing the US, long considered the global leader in sophistication and transparency,” says financial information service Bloomberg.
How the new regulations will impact the City of London and other European markets remains to be seen.
Brexit issues for the City
Mifid II has been years in the making and promises to deliver a better deal to consumers – but at a cost.
Investors must complete up to a 65-box questionnaire every time they make a trade, even if the deal does not go ahead.
Mifid II does mean that if Britain and the EU strike a Brexit deal where financial firms in the UK adopt the rules after Brexit, they will still have the opportunity of selling their services across Europe without including them in a separate trade deal.
“Whether or not the trade talks extend to finance, the EU may use market access for UK banks and insurers as leverage on other issues,” Bloomberg reports.
Isn’t Mfid 2 pretty much a disaster for U.S. expats trying to save into a SIPP pension in the U.K.? All of the U.S.-based ETFs seem to be going or gone, but the U.S. extends its tax code to its citizens abroad and taxes non-U.S.-based financial products heavily..