Question

The European regulation MiFID II (Markets in Financial Instruments Directive), that was enacted in January 2018, is believed to have fundamentally affected the field of equity research. Discuss the implications of this regulation to sell-side analysts, fund managers and the investee companies (corporates).

Answer 1

MiFID was firstly Introduced in the year 2007 and an improvement to this was introduced in Jan 2018. It was implemented to bring more transparency and effectiveness in the European Market . It aims to safeguard to interest of investors and make markets safer for trading. It was implemented to move a significant part of over the counter trading to regulate trading.

It affects all the financial trading Entities and Markets of Equity and Other financial commodities.

MiFID affects Sell side analysts as they have to research less about Pricing and other Implication of rules due to more transparency in the market. They should also have to study about the rules of MiFID affecting the Trading of the shares before advising to the Investor . MiFID will show clear separation in payments made to Analyst research and trace commission which will bring Transparency into the market.

Fund Managers have the responsibility of managing the funds of its portfolio . MiFID will affect positively to the fund managers as they are able to predict Changes in the market according to rules and regulation prevailing and can allocate their funds to more result oriented investment plan because market will be more transparent and safer.

Investee companies have to follow all the rules and regulations stated in the MiFID II . Companies have to follow standards for investment products stated by MiFID. They have to follow Transparency and provide all the relevent information to the investor regarding The investment Products. It will be easy for the companies to gain investor interest due to MiFiD as it safeguard investors interest.