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Europe's executive arm plans to introduce key elements of the MiFID II reforms as regulation rather than as a Directive, thereby forcing Member States to implement the new rules to the letter and further concentrating national rule-making power in Brussels.
Tim Gieles, a senior associate at financial consultancy Cicero in Brussels, said: "This has an important legal consequence because it allows Member States no chance to deviate. A key aim of MiFID is to increase transparency of trading across Europe, and the Commission doesn't want to take the risk of any trading moving into the dark. The only way to do this is to implement the new rules as regulation across all Member States."
However, in a draft proposal circulating in Brussels, the European Commission notes: "The EU has committed to minimise, where appropriate, discretions available to Member States across EU financial services Directives.... and help further develop a level playing field for Member States and market participants. As a result, the proposal amending MiFID is divided in two".
MiFID II will comprise two texts: a Directive updating the 2007 version, and a regulation that will introduce a range of new rules regarding trading transparency, including how derivatives are traded, reported and cleared.
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