Markets in Financial Instruments Directive

The MiFID (Markets in Financial Instruments Directive) is a European Directive that sets out a new regulatory framework for harmonising the financial instruments markets in Europe. Find out more about the MiFID and how it affects you as an investor. 

What is the MiFID?

The MiFID is a European Union Directive that sets out a new regulatory framework for financial instruments markets. It applies in the European Economic Area (EEA), i.e. the 27 EU Member States plus Iceland, Norway and Lichtenstein. The Directive was incorporated into the Greek legislation with Law 3606/2007 and came into force on 1 November 2007.

What is the scope of the MiFID?

What is the scope of the MiFID?

  • The organisation and monitoring of investment services firms and organisations
  • The transactions between investment firms and customers in financial markets
  • The investment services offered to customers.

How do investors benefit?

The MiFID changes the organisation of investment services firms, facilitates transactions and promotes the harmonisation of European investment markets.

Most importantly it ensures transparency and protects investors, especially the ones with inadequate knowledge and experience. For example, the MiFID has an immediate positive impact on investors, as it:

  • Classifies investors according to their investment knowledge and experience
  • Delivers the best possible result when executing an investor’s orders
  • Assesses the suitability and appropriateness of investment services, so that the most fitting investment solution is proposed to each investor and investors do not assume greater risk than intended
  • Briefs investors on commissions and potential considerations
  • Briefs investors on the Conflict of Interest Policy of their investment firms

MiFID Stakeholders

The MiFID concerns EU companies and organisations that provide investment services. These companies and organisations include:

  • Credit Institutions
  • Investment Services Firms, Investment Brokerage Firms, Mutual Fund Management Firms
  • Organised markets and market operators (e.g. stock exchanges)
  • Central Banks,
Persons who carry out transactions on investment products and persons who receive investment services.

What products and services does the MiFID regulate?

The MiFID regulates all investment products / services, such as:

  • Equities
  • Bonds
  • Mutual Funds
  • Οptions
  • Futures
  • Swaps
  • Derivatives
  • Structured Products, etc.
It does not apply to the following products as they are not considered investments:

  • Deposits
  • Loans
  • Spot transactions on foreign exchange and commodities

Are there changes directly affecting investors?

Piraeus Bank has already implemented many of the MiFID provisions in the context of its current commitment to and policy of providing customers with high quality services. Therefore, there will not be any significant changes in the way you communicate and carry out your transactions with the Bank.

How will the MiFID affect the way banks operate?

  • Client Classification
Clients are classified according to their knowledge and experience of markets and financial instruments. So, clients who are unable to identify underlying risks are protected more. In particular, clients are classified in one of the following three categories set out in the Directive, before any of their orders are executed or they acquire any investment product: Retail Investor, Professional Investor and Eligible Counterparty.

  • Suitability & Appropriateness Tests
For each client, an investment profile is created to determine the client's investment objectives and risk appetite. All products and services proposed must be consistent with the client's investment profile. So, "unsuitable” products cannot be proposed.

  • Best Execution
The adoption of rules governing the management and execution of client orders and the requirement for delivering the best possible result for the client (best execution) strengthen investor protection.

  • Conflict of Interest
Specific requirements are adopted for managing conflicts of interest, outsourcing, record keeping and safeguarding client assets .

  • Harmonisation of the European Investment Markets
    • MTFs (multilateral trading facilities) are introduced. Credit institutions may now establish non-exchange equities trading platforms. /li>
    • The same terms of competition apply to all organised European markets, such as rules for admission to trading, including commodity derivatives and units in UCITS.
    • A so-called "passport” facilitates cross-border investment services provision. This "passport" enables investment firms to provide investment services in other EU Member State markets as well.
  • Reinforced Monitoring & Supervision
    • The responsibilities of supervisory authorities are expanded and rules for ensuring markets credibility are reinforced.
    • Finally, banks and brokerage firms must have written policies and procedures, ensure their implementation and maintain records necessary to monitor compliance.