The Markets in Financial Instruments Directive II or MiFID II builds extensively on a 2007 set of rules by extending transparency requirements beyond shares to bonds, commodities and derivatives.
It improves investor protection to apply lessons from the 2007-09 financial crisis, and strengthens EU-level supervision.
The main elements:
* New transparency requirements for trading platforms to tell the wider market what prices are being offered so that investors can check they are getting the best deal;
* Much wider range of trades must be reported to regulators in a more standardized format. The data will be used by regulators to spot market abuses and by investors to highlight less competitive prices;
* Trading over the telephone replaced with electronic platforms in bonds and off-exchange derivatives to boost transparency;
* Systematic internalizes or matching buy and sell orders for shares inside a bank will be more strictly regulated;
* High-frequency trading or ultra fast trading rules updated;
* EU securities watchdog ESMA gets powers to restrict or ban financial products that are harmful;
* Banks and advisors must be clear about which type of investor is suitable for a product to avoid high-pressure sales that target everyone;
* Asset managers must be clear to customers about who pays for stock research they get from banks;
* Volume caps on "dark pool" or off exchange trading;
* Position or size limits on how much of a commodity a broker can hold to avoid undue influence over market prices.
(Reporting by Huw Jones. Editing by Jane Merriman)
