Explain 3 key provisions of MiFIDII and explain how they are meeting the objectives of MiFIDII.

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Explain 3 key provisions of MiFIDII and explain how they are meeting the objectives of MiFID II.

Transaction reporting: asset classes that have previously been exempt from any reporting obligations are now included into the MiFID II reporting scope. The reporting requirements now also apply to a greater range of investment firms that were previously exempt from MiFID I. Additionally, the transaction reports and all orders will need to be retained at the disposal of the competent authority for five years. Given there is a significant increase in the number and nature of data attributes this is likely to have a material impact on organisations with regards to complex planning and implementation of the collation, interpretation and reporting of data. Further, there is an explicit requirement for firms to establish an adequate ongoing control framework to ensure that their reporting is complete and accurate by testing their full reporting process and conducting end-to-end reconciliations of reports and data. Firms should not underestimate the challenges and lead time to ensure compliance.

Organized trading facilities (OTF): in line with G20 objectives, OTC derivative trading is obliged to move to trading venues — regulated markets (RM), multilateral trading facilities (MTF) and OTF — to reduce bilateral risk. OTF is a new category for non-equities allowing some discretion by operator over execution, but with restrictions on the use of own capital.

Investor protections: a ban of inducements for firms offering independent advice, enhanced provisions around suitability and appropriateness, particularly around complex products, and the introduction of regulatory powers to ban and suspend trading for specific products.

Rahul Sunny answered 2 years ago

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