Markets in Financial Instruments Directive (MiFID) is an EU directive that will replace the existing Investment Services Directive (ISD), that is, Directive 93/22/EEC. It aims to create an integrated structure for a pan-European market for investment products.

In particular it aims to make cross-border trading in securities in Europe easier for financial institutions and investors by improving the passport rights created under the ISD. It also aims to extend the passport rights to new products and services (for example, commodity derivatives, credit derivatives, and financial contracts for difference).

In other words, under MiFID, market participants will be able to access the market in any EU country on the same terms and conditions as they transact business in their home country.

The directive also seeks to promote competition between trading venues by recognizing new types of trading venue, notably the multilateral trading facility (MTF) and by creating a common best execution regime.

MiFID comprises two levels of European legislation:

In Level 1, the Directive was adopted in April 2004.

In Level 2, the main Directive was supplemented by ‘technical implementing measures’ developed on the basis of advice provided by the Committee of European Securities Regulators (CESR) in 2005. Level 2 measures were officially published on 2 September 2006.

Applicants to MiFID

MiFID affects market participants providing core and non-core services.