MiFID is intended to establish a high level of core business standards across firms who provide investment services or trading in securities and financial instruments in Europe.
This is to encourage uniform standards and hence ease of competition across borders. Through regulation of financial firms customers will benefit from a number of protections and the assurance that they are being dealt with in an even-handed way.
The requirements of MiFID are primarily targeted to make sure that retail customers are suitably protected. Corporate treasury operations will for the most part want to be treated as professional customers, in which case slightly relaxed standards of protection will apply but there will be fewer hindrances on doing business quickly and cost effectively and without excessive administrative burdens.
MiFID will come into force in the UK from 1 November 2007 and in theory in the rest of Europe too. However most countries are running well behind the official timetable for implementation.
The financial instruments to which MiFID will apply include transferable securities, money market instruments, money market funds, options, futures, swaps, forward rate agreements and all manner of derivatives, although certain commodity derivatives if they can be physically settled and are for commercial purposes are excluded.
Commodity and FX spot deals are excluded as are forward FX deals done for commercial purposes. If a FX forward deal is associated with an investment service such as the acquisition of some foreign currency shares it is within MiFID.
