What are the MiFID II and EMIR and why do they matter?
The MiFID is the Markets in Financial Instruments Directive and has been in force across the EU since late 2007. The MiFID sets out:
- Conduct requirements for businesses and investment firms;
- Authorisation requirements for regulated markets;
- Regulatory reporting to avoid market abuse;
- Trade transparency obligations for shares; and
- Rules regarding the admission of financial instruments to trading.
It has since been updated in an effort to address certain shortcomings, particularly with regard to its policy on equities. The new and improved version, the MiFID II, has been in force since 3 January 2018. The revamped version has set its sights on increasing safety, transparency, and efficiency within the European market, restoring investor confidence, and moving a portion of over-the-counter trades to regulated trading venues.
The MiFID was not the first directive that resulted in an LEI being required by specific entities. Prior to this update, the European Markets Infrastructure Regulation (EMIR – see below for more information), amongst other regulations and directives in Europe, Asia, Canada, and the US, also required counterparties to transactions made in the financial marketplace to have an LEI number.
That said, the MiFID did result in the sweeping changes that came into effect on 3 January 2018 with regard to the parties who required an LEI to engage in financial transactions within the EU. It now covers most separate legal entities, such as trusts, companies, pension funds, charities, academy schools, partnerships, and some unincorporated societies.
Whilst the MiFID II Directive doesn’t directly affect Canadian entities, many are, nonetheless, affected by it. If you are trading on the financial market within the EU and you are a legal entity (as opposed to an individual), you are likely to require an LEI. Thus, Canadian companies trading in securities in the EU are required to acquire and maintain an LEI while carrying out these activities.