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The rules are aimed at promoting the integration, competitiveness, and efficiency of EU financial markets, amending and replacing the existing "MiFID" text that regulates markets in financial instruments.
The aim is to ensure that all organised trading is conducted on regulated trading venues: regulated markets, multilateral trading facilities and organised trading facilities. Strengthened requirements are introduced in relation to organisation, transparency and market surveillance in all three types of venue. Transparency requirements are calibrated for different types of instrument, notably equity, bonds and derivatives, and for different types of trading, notably order book and quote-driven systems. High-frequency trading will be limited.
The directive and regulation cover the provision by banks and investment firms of services such as brokerage, financial advice, dealing, portfolio management and underwriting. They are aimed at overcoming problems that have emerged in the implementation of rules that entered into force in 2007 and which essentially abolished the possibility for member states to require trading to take place on specific exchanges, enabling competition from alternative venues.
Market and technological developments have outpaced various provisions in the existing MiFID text and the trading environment has become more complex. The 2008 financial crisis exposed weaknesses in the regulation of instruments other than shares, traded mostly between professional investors. Such developments underscored the need for strengthened investor protection. Whilst remedying such problems, the revision of MiFID will enable the EU to meet commitments made at the G20 summit at Pittsburg in September 2009 to tackle less regulated and more opaque parts of the financial system.