Markets in Financial Instrument Directive

In this paper we will discuss about the Markets in Financial instrument directive. It is basically a law introduced by the European Union, in 2004, to control the financial market operations in the member countries. The “Committee of Wise Men” whose chairman is Baron Alexandre Lamfalussy had enacted the law.
The Markets in Financial Instruments Directive (MFID), that is been corrected every now and then, is a law introduced by the European Union. It provides a regulatory regime to run investment services across the member countries of the European Economic Area.

The main aim of MFID is to increase competition and also, consumer protection in the investment services. The law had been introduced in November 2007. The Markets in Financial Instruments Directive is the basic foundation of the European Commission’s Financial Services Action Plan, which operates the financial market activities in the European Union countries.
The “Committee of Wise Men” whose chairman is Baron Alexandre Lamfalussy enacted the law. Companies covered by the Markets in Financial Instruments Directive will be governed and authorized in their own country, that is, in which their registered offices are situated.
After getting the authorization, the companies can use the passport to facilitate their customers with trade licenses for starting businesses in the EU member countries.

The MFID is used to categorize the clients of those companies who have been authorized by it. This increases the protection level, which is needed to match the clients with the types of investment products. The law needs information regarding client orders so that it can ensure the fact that the companies are serving the clients’ best interests.

MFID advises the firms to publish the price and volume of all trades in the listed shares, even for those trades that are executed outside the regulated market. It also ensures the best possible result out of the firms while delivering the orders for their clients. However, the MFID is also active in the security industries of UK.

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Last Updated on : 1st August 2013

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