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Introduction

Markets in Financial Instruments Directive (MiFID) is going to be implemented on November 1st, 2007. MiFID will be introduced to the European Union and will be a step towards creating a single European Financial Market. MiFID is perceived to be the most creative, innovative and ambitious legislation to be implemented ever. MiFID's impact on the European Union (EU) will be significant as it will change the way businesses operate. When implemented, there are also going to be significant changes to the European regulatory framework. MiFID has introduced a lot of new rules and regulations to the market and will profoundly affect the market. There will be a lot of new opportunities that will arise out of the new system.

MiFID is an important part of the European Union's Financial Services Action Plan (FSAP) as it is one of forty two measures of the FSAP. This new system is going to bring in a more competitive and innovative market as businesses or firms, particularly investment firms, will be permitted to go across boarders of Europe to do business within their home country regulations and this will result in stock exchanges competing with the banking industry to get a share of their businesses.

One of the primary reasons that MiFID will have a huge impact on the European Union is due to the enhancement of the transparency level. MiFID is instilling a number of order and trade publications requirements imposed on organized exchanges, called in the Directive regulated markets, qualifying ATSs, called in the Directive Multilateral Trading Facilities (MTFs) and broker dealers that execute internally transactions in shares admitted to trading on an organized market in the EU on an organized and systematic basis, called in the Directive systematic internalisers. This papers main focus will be on the impact that MiFID transparency rules will have on the trading within the EU equity markets. The paper will be structured as follows:-

Brief Overview of MiFID

Benefits of MiFID

OVERVIEW OF Markets in Financial Instruments Directive (MiFID)

The Markets in Financial Instruments Directive (MiFID) was published on 30 April 2004 in the Official Journal. The initial target to implement this new directive was by 30 April 2006. However, MIFID is now to be implemented on November 1, 2007. MiFID is replacing the current system, Investment Services Directive (ISD). This has been a major overhaul and plan by the European Union Financial Services Action Plan (FSAP). MiFID is to integrate all the markets into a single market for all businesses from wholesale to financial institutions such as investment services, securities, derivatives. One of the new services provided by MiFID is that the EU requirements will be covering investment advice, provide service for commodities securities and derivatives and give services to the operation of multilateral trading facilities (MTFs).

MiFID is replacing ISD because of the continuous innovation of the trading systems being developed and the activities of large investment firms handling orders from cliental. This resulted in the traditional exchange operators not being consistent and therefore incomplete. This created a lot of conflict. MiFID is to create a level playing field which is fair and consistent between stock exchanges, investment firms and modern equity trading venues. This requires a higher level of transparency for the regulated markets, MTFs and large investment firms that internalize orders from clients. With the ISD, the proposal of the single market was being delayed by single member state regulations on firms in terms of the organizational requirements and the way businesses were being conducted.

The basic purpose of the MiFID is the same as ISD. But due to significant changes in the financial markets and services, and the evolving nature of the development and regulations of the Single Market and the way the National Regulators were dealing with the problems to ISD, the construction of MiFID made tremendous profound changes to the regulatory framework.