MiFID II
The EU's Markets in Financial Instruments Directive II, governing investment services, transparency, and investor protection across European markets.
What is MiFID II?
MiFID II (Markets in Financial Instruments Directive II) is the European Union's comprehensive regulatory framework governing the provision of investment services and activities across EU member states. Effective January 2018, it substantially expanded its predecessor MiFID I by introducing stricter requirements for: trade transparency (pre- and post-trade reporting), product governance, conflicts of interest disclosure, inducements and research unbundling (requiring investment managers to pay separately for research rather than bundling it with trading commissions), best execution obligations, and suitability and appropriateness assessments. MiFID II applies to investment firms operating in the EU and has had global effects because many non-EU firms must comply when trading with EU clients.
Example
Before MiFID II, European fund managers routinely paid for investment research by routing trades through brokers—a practice called 'soft dollars.' Under MiFID II's research unbundling rules, managers must now pay for research from a separate research payment account. This forced a fundamental repricing of investment research and reduced the number of companies receiving analyst coverage, particularly smaller firms.
Source: European Securities and Markets Authority — MiFID II