MiFIR/MiFID II

MiFIR (Markets in Financial Instruments Regulation) is a European regulation that works alongside MiFID II (Markets in Financial Instruments Directive II) to increase transparency and oversight in financial markets. It came into effect on 3rd January, 2018 and applies to investment firms, trading venues and market participants within the EU.

MiFID II and MiFIR create a comprehensive transaction reporting framework that enhances market surveillance and investor protection. Firms must ensure accurate, timely, and complete transaction reporting or face significant penalties.

Through MiFIR/MiFID II, organisations are able to send their transaction reports directly to the regulatory endpoint. This removes the need for a an ARM (Approved Reporting Mechanism), making the entire reporting journey quicker, simpler and more cost effective.

MiFIR is a regulation, meaning it has direct effect in all EU member states without needing local implementation. It focuses on:

• Pre- and post-trade transparency (reporting requirements for trading activity).

• Data reporting (real-time publication of trade data).

• Systematic Internalisers (SIs) (rules for firms executing client orders off-exchange).

• Transaction reporting (ensuring regulators have full visibility of trading activity).

Who does it apply to?

• Trading venues, financial firms and investment banks involved in securities trading.

MiFID II is a directive, meaning that EU member states must transpose it into national law. It sets broad rules for financial markets, focusing on:

• Investor protection (e.g., stricter rules for financial advice).

• Best execution (firms must ensure clients get the best trade conditions).

• Product governance (ensuring financial products are suitable for investors).

• Transparency and trading rules (regulating trading venues and brokers).

Who does it apply to?

• Investment firms, brokers, banks, asset managers, trading platforms and financial advisors.

Scope & Applicability

• MiFIR (Regulation) establishes the core transaction reporting framework.

• MiFID II (Directive) provides additional guidance on how firms should comply.

• Applies to investment firms, trading venues, and approved reporting mechanisms (ARMs).

Who must report?

• Investment firms executing trades.

• Systematic Internalisers (SIs).

• Trading venues (regulated markets, MTFs, OTFs).

• Central counterparties (CCPs).

Who receives the reports?

• National Competent Authorities (NCAs) (e.g., the UK’s FCA, Germany’s BaFin).

• Reports are then shared with ESMA (European Securities and Markets Authority).

Key Reporting Obligations

a) Transaction Reporting (Article 26 of MiFIR)

• Every trade in financial instruments must be reported by the end of the next working day (T+1).

• Reports must include detailed information about the trade, including:

  • Buyer & seller identification (LEI, national ID).

  • Instrument details (ISIN, type of security).

  • Trade price, quantity, and venue.

  • Execution timestamps (down to the millisecond).

  • Algorithmic trading identifiers (if applicable).

  • Short sale indicators (if a position is being shorted).

Why? To allow regulators to detect market abuse and ensure fair trading.

b) Pre-Trade & Post-Trade Transparency

• Pre-trade: Trading venues must publish bid/offer quotes before execution.

• Post-trade: Trade details (price, volume, execution time) must be published immediately after execution.

Why? To improve price discovery and market transparency.

c) Reporting via ARMs (Approved Reporting Mechanisms)

• Investment firms can outsource transaction reporting to an ARM (a registered entity that submits reports on their behalf).

• ARMs ensure accurate formatting and compliance with ESMA rules.

Why? To reduce reporting burden on firms and ensure consistency.

Consequences of Non-Compliance

• Fines from regulators (e.g., ESMA, FCA, BaFin).

• Increased regulatory scrutiny, audits, and possible trading bans.

• Loss of reputation and potential legal action.

To help organisations and individuals better understand reporting under MiFIR and MiFID II, we've produced the below resources.

Webinars - Watch or revisit our collection of webinars on MiFIR and MiFID II

Useful links

MiFID Legislative Text - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32004L0039&from=EN

MiFID II Legislative Text - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02014L0065-20230323

MiFIR Legislative Text - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02014R0600-20220101

MiFIR Reporting ESMA - https://www.esma.europa.eu/data-reporting/mifir-reporting

UK MiFIR Reporting FCA - https://www.fca.org.uk/markets/transaction-reporting

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