What is MiFID?

MiFID rules are set to upend the way brokers share information, sniff out the best prices and pay one another. It’s the second attempt to regulate markets via an awkwardly named EU initiative called the Markets in Financial Instruments Directive, or MiFID.

Brokers will be driven to move transactions in a wide range of securities on to open, regulated platforms, limiting unreported broker-to-broker deals that have been the traditional way to trade things such as commodities, bonds and energy. Investors will no longer be able to pay for research by routing trading commissions to investment banks that employ their favourite analysts.

To help protect markets from automated trading, which has swelled to more than half of the total, algorithms must be registered with regulators, tested and include “circuit breakers” that can shut them down.

The new regulations have the potential to reach far beyond banks operating in London or Frankfurt to institutions trading European stocks or bonds anywhere in the world.