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HMRC internal manual

Stamp Taxes on Shares Manual

Financial markets: background: Markets in Financial Instruments Directive (MiFID)

There were further major changes to how the European financial markets operate with the introduction in 2007 of the Markets in Financial Instruments Directive (MiFID) (Directive 2004/39/EC).

MiFID harmonised the regulation of financial services across the members of the European Economic Area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein). MiFID replaced the Investment Services Directive and reflected changes in financial services and markets that had taken place since the earlier Directive was issued.

Broadly MiFID was designed to:

  • Create harmonization and increase competition across jurisdictions
  • Protect investors
  • Increase efficiency
  • Enhance financial transparency

The Financial Conduct Authority is responsible for the regulation of the securities industry in the United Kingdom and has incorporated MiFID into its Handbook of rules and guidance.

MiFID also introduced a new trading venue know as a multilateral trading facility (MTF) (see STSM123050). The proliferation of new entrant MTFs to the market has led to increased competition between trading venues and a reduction in transaction costs. It has also resulted in market fragmentation, with shares being traded on multiple venues, whereas previously trading in a security would have been concentrated on one exchange. As a result investors may be unaware of the best price available for their trades.