The report identifies potential market failures and offers valid alternatives, while focusing on three core areas: transparency, market structure, and provision of investment services.

While initially limited to strengthening conduct of business requirements and reviewing mandatory areas, several factors have called for a more extensive review of the Directive. New priorities have emerged as the debate on the causes of the financial crisis has advanced and new institutions have been established on both sides of the Atlantic to monitor markets and macro-prudential risks. Also, the advantages of technological innovation are seen differently today than they were before the crisis.

The functional approach of MiFID is set to become more prescriptive, in line with other forthcoming legislation and the G20 objective to leave no area of financial markets unregulated. By reducing the number of exemptions and extending the scope of the Directive, the breadth of implementing measures will expand, together with the role of ESMA and national supervisors. In this context, there will be less scope for self-regulation. Instead, the task will fall upon supervisors to keep rules up to date with fast-moving market innovation.

The objective of the review is to improve market integrity, stability and efficiency, as well as investor protection. Given the breadth of the changes foreseen, this Task Force has chosen to focus on three core areas:


1. Transparency; 
2. Market structure; and 
3. Provision of investment services. 


While the review has identified some regulatory gaps, it mainly seeks to improve the way the Directive is implemented and enforced by national authorities. The European Commission and ESMA should minimise the risk of adding layers of regulation where failures are the result of inadequate supervision or enforcement. Clarifying intended scopes of current regulation may help to create a more harmonised framework of supervisory practices. Most importantly, the review should clarify ambiguities in the legal text when the application of the law is inconsistent. 

Investors should benefit from the new MiFID. The revision of the legal text should aim at solving legal and market divergences across Europe, and make sure that the benefits of the new competitive environment are spread along the value chain and passed on to final users, retail and wholesale investors, as appropriate. 

When it comes to assessing the effects of MiFID, it is difficult to disentangle the impact of regulation from the effects of the recent financial crisis. Nevertheless, the creation of a harmonised regulatory framework for the provision of investment services in Europe is a paramount achievement of the Directive. 

MiFID has changed European capital markets in many ways. It has brought greater competition among trading venues, and among investment firms both on trading costs and execution services. It has also contributed to substantial investments in technology for trading and platforms. The growth of dark trading venues, such as MTF dark pools and broker-dealer crossing networks, has been another interesting consequence of the new environment. Finally, the Directive has widened the scope of transparency requirements; harmonised the framework of business conduct rules and improved the protection for investors. 

Still, there is scope to bring more clarity to some definitions and further harmonise rules and supervisory practices. In some other areas, such as market quality (price formation) and integrity, the impact of the Directive is not yet apparent, since evidence remains fairly controversial and inconclusive. 

Executive summary