Markets In Financial Instruments Directive ("MiFID"): European Commission Sends Formal Drafts For "Level 2" Implementing Measures To European Parliament And European Securities Committee

The European Commission has presented its formal drafts to the European Parliament and the European Securities Committee (ESC) for a series of technical measures implementing the Markets in Financial Instruments Directive (MiFID). The MiFID is one of the corner stones of the Financial Services Action Plan which seeks to create a single market for financial services in Europe and is also a response to structural changes in the European securities markets. The objective of the MiFID is to enable investors to invest and procure investment services across EU borders more easily, to remove obstacles to the use of the EU passport by investment firms, to foster competition and a level playing field between Europe’s trading venues, and to ensure appropriate levels of protection for investors and consumers of investment services across Europe. The MiFID will play an essential part in building the more integrated, deeper and efficient capital market which Europe needs to lower the cost of capital, generate growth and boost its international competitiveness. The proposed measures now being submitted to the European Parliament and the ESC are the so-called "level 2" measures(or “implementation measures”) required under the "Lamfalussy" process; they will make operational the principles set out in the "level 1" Directive (IP/04/546). The draft measures are being tabled after a very extensive round of intense consultations with all stakeholders over the last two years. They are designed to protect investors and consumers without imposing unnecessary compliance burdens on firms. The measures have been drafted to provide firms with clear and predictable rules and to give greater security to investors and consumers who buy services from foreign firms.

Internal Market Commissioner Charlie McCreevy said: "These Level 1 measures agreed by Parliament and Member States bind us to a basic framework. Our draft Level 2 measures matter. They will provide a high level of protection for investors while keeping red tape to a minimum. They will also increase cross-border competition to the benefit of investors and issuers alike. Our aim is to create a level playing field for firms and to provide clarity for investors, while at the same time ensuring that the new rules can be incorporated into national legal systems as Member States demand. I believe that we have accommodated both of these objectives. I now look forward to working closely with the Parliament and the Member States over the next few months to find the widest consensus possible. Meanwhile, firms should start preparing now for MiFID: there will be a first-mover advantage."

The proposed "level 2" measures are in line with the "Level 1" Directive which was adopted in April 2004.

In accordance with the "Lamfalussy" process, the draft measures have been sent to the European Parliament and the European Securities Committee (ESC) who will examine them over the next three months. Following the vote in the ESC, the European Parliament will have a one-month period to check that the limits set in the "Level 1" Directive have been respected, before the measures are adopted by the Commission, probably during summer 2006.

The recently approved extension Directive will push back the application date for the "level 1" Directive to November 2007. This is to allow firms to make the necessary preparations.

The formal drafts, together with background notes and frequently asked questions (MEMO/06/57), are available at:

http://europa.eu.int/comm/internal_market/securities/isd/mifid2_en.htm