MIFID II builds on its predecessor MIFID I, which is considered the regulatory “cornerstone” for the EU’s financial sector, standardizing business conduct, transparency and protections across the single market. The single market is an association of countries trading with each other without restrictions or tariffs and financial firms are worried that the U.K. could lose access to this and not be able to sell their services across the region with the same ease as before.
The 2007 financial crisis highlighted the need for additional rules and requirements, to make financial markets, “more efficient, resilient and transparent,” European Securities and Markets Authority documents explain.
It’s meant to tackle speculative investments by non-financial firms, regulate commodity derivative trading, high-frequency-trading, introduce liquidity assessments for non-equity assets, and improve disclosures.
Currently, a bank based in an EU country has a financial “passport” that allows it to do business in another member state. However, the brand new MIFID II will notably include changes to the “passporting” regime which allows firms in to carry out business or perform investment services across borders without needing to obtain an independent license in each country.