MiFID
Convergence towards a Unified European Capital Markets
Industry
Europe's Markets
in Financial Instruments Directive (MiFID) is sending shockwaves through the
European financial community as firms struggle with its implications and
implementation. There has been the predictable industry criticism and efforts to
blunt some of MiFID's provisions. This book is somewhat of a response. The
authors explain the background of MiFID, the needs it addresses and the ways it
addresses them. It is a resounding endorsement of MiFIG but also a meticulously
researched and informative look at emerging trends in finance.
Europe's 1993
Investment Services Directive (ISD) was a sweeping piece of compromise
legislation that was to open up cross-border finance within Europe. It
accomplished much, but its "passport" mechanism for allowing a financial firm in
one European country to operate in others proved ineffective. Europe's financial
industry remains geographically fragmented.
The markets have
also changed enormously since 1993. New derivative or structured products have
emerged. Multilateral trading facilities have challenged traditional exchanges.
Investment advisory services—not addressed by ISD—have flourished. MiFID is
Europe's response to these and other issues.
Contents
Introduction
1. MiFID: Context of the European Directive
2. The Development of Multilateral Trading
Facilities and ECNs
3. An Emerging Pan-European Level Playing Field
4. The Likely Impact of MIFID
5. Best Execution
6. Transaction Cost Analysis
7. New Framework for Advanced TCA
This is an
excellent book on MiFID. It describes the directive, provides background,
especially on the 1993 ISD, and delves into market developments that have
motivated much of MiFID.
There is a
chapter on multilateral trading facilities, and another on creating a level
playing field for financial institutions throughout Europe. A goal of MiFID
is to ensure best execution of trades for investors. While laudable in
principle, this is a difficult goal to achieve, let alone define. The book
has an entire chapter on the topic. There is also a chapter on measuring and
controlling transaction costs.
If you are interested in the theory of markets
microstructure, as described in Harris (2003),
this book will give you the regulatory perspective on many of the same
issues.
There is a
wealth of information here. I recommend the book to anyone who needs to
understand MiFID or trends in financial regulation. I also recommend it for
anyone with an interest in market developments that are shaping,
not only market regulations, but the very financial landscape of today. The
book is excellent. [December 11, 2006]
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