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The objectives of MiFID II are to increase market transparency, efficiency and safety by bringing the majority of non-equity products into a robust regulatory regime and moving a significant part of OTC trading onto regulated platforms.

MiFID II Level 2

MiFID II will bring much of the transparency traditional in equity markets to bond trading. Europe will go further with bond transparency rules than just about anywhere in the world, including the US. MiFID II’s regulatory regime brings into effect pre-trade transparency for bonds as well as post-trade. This will result in a significant impact on the market structure of bond markets. Bond pre-and post-trade transparency requirements will be calibrated for different types of bond market trading structures such as order-book, quote-driven, hybrid and periodic auction trading systems. In order to calibrate bonds correctly for MiFID II transparency obligations, IT systems have to be enhanced, developed or built from scratch. This is a major undertaking for the industry. Banks, regulators and investors are dependent on data collected to meet MiFID II’s commitments.

Owing to the need for an IT build both by National Competent Authorities and by the industry, MiFID II is set to be delayed by one year, most likely to 30 January 2018. Most market participants believe it would be better to tie the MiFID II delay to the publication in the Regulatory Technical Standards (RTS) in the Official Journal of the EU as IT builds cannot begin in earnest until these RTS are published. Regardless, it is expected the Commission will announce formally a calendar one-year delay before the publication of the RTS. The result is that the industry will not actually benefit from the Commission’s full one-year delay. However, it is important to note that most market participants view any delay as a welcome outcome.

End of third quarter 2015, ESMA published its final report on MiFID II as well as draft Regulatory Technical Standards (RTS). Included in the RTS is a newly introduced liquidity assessment for non-equity instruments (including fixed income).

MiFID II expected timeline:

July 2016 On 14th July the European Commission adopted further regulatory technical standards:
RTS 1 (transparency requirements across equities and ETDs)
RTS 2 (transparency requirements across bonds and derivatives)
RTS 7 (trading venue organisational requirements)
RTS 11 (tick sizes)
RTS 23 (reference data requirements)
RTS on authorisation (investment firm authorisation requirements)
RTS on cooperation between authorities
RTS on registration of third country firms
December 2016 ESMA due to deliver 4 further sets of Guidelines and Recommendations for MiFID II by 31st December.
Early 2017 Instrument reference data project announced in April 2015 due to be delivered by ESMA.
July 2017 Due to the 12 month delay to MiFID II agreed in June 2016, EU countries are due to transpose the new MiFID II directive into local laws by 3rd July 2017. Implementation was due to take effect 30 months from the entry into force following publication in the Official Journal of the European Union. As MiFID II is a directive, implementation will therefore take longer whilst some provisions of MiFIR will take effect immediately upon publication. However, both pieces of legislation are designed to work together.
2017 ESMA expected to publish Q&As to assist market participants in understanding the legislation following the entry into force of Level 2 text on 3rd January 2017.
January 2018 MiFID II and MiFIR are scheduled to enter into force on 3rd January 2018, following a 12 month delay agreed by legislators in June 2016 from the original date of 3rd January 2017.

MIFID II papers and responses to consultations

December 2016
ESMA Consultation Paper on Consolidated Tape – ICMA Submission

November 2016
ICMA ‘FAQ’ on systematic internalisers for bond markets

November 2016
A briefing note on systematic internalisers for bond markets

October 2016
SFT Reporting Requirements

September 2016
MiFID II/R Fixed Income Best Execution Requirements RTS 27 & 28

September 2016
MiFID II/R and Repo Q&A

March 2016
ICMA response to FCA CP: Markets in Financial Instruments Directive II Implementation – Consultation Paper I Q6, 8, 12 and 13

March 2016
MiFID II/MiFIR – Transparency & Best Execution requirements in respect of bonds - presentation Q1 2016

15 June 2015
JAC response to ESMA Consultation Paper - Draft guidelines on complex debt instruments and structured deposits (item 40 on the ICMA retail structured products webpage)

2 March 2015
ICMA responded to an ESMA Consultation Paper on MiFID II/MiFIR

See also:


Liz Callaghan
Director, Market Practice and Regulatory Policy; Secretary to the ICMA Secondary Market Practices Committee
Direct line: +44 20 7213 0313

Andy Hill
Senior Director, Market Practice and Regulatory Policy; secretary to the ICMA Secondary Market Practices Committee.
Direct line: +44 20 7213 0335