Investment firms, trading venues and data reporting services providers in the EU and UK have to meet detailed rules on authorization, client protection, record keeping and transaction reporting. MiFID II sits alongside a companion regulation, MiFIR, and a separate UK framework.

What is MiFID II?

MiFID II is the EU directive (Directive 2014/65/EU) that regulates investment firms, market operators and data reporting services providers. It aims to make financial markets more robust and transparent and to enhance investor protection. Alongside its companion regulation MiFIR, it sets rules on authorization, client protection, record keeping, transparency and transaction reporting.

It recast an earlier directive, Directive 2004/39/EC. The EUR-Lex summary says the directive creates a new legal framework that better regulates investment and trading activities on financial markets and enhances investor protection.

That summary lists these aims among its key points:

  • Ensuring financial products are traded on regulated venues, including a new type of venue called the organized trading facility (OTF)
  • Strengthening the transparency requirements that apply before and after financial instruments are traded
  • Limiting speculation on commodities, because national authorities may limit the size of a position that market participants can hold in commodity derivatives
  • Adapting rules to new technologies by establishing controls for trading activities that are performed electronically at a very high speed, such as high-frequency trading
  • Reinforcing investor protection, because investment firms should act in accordance with the best interests of their clients when providing them with investment services

Start date and later amendments

EU Member States had to transpose Directive 2014/65/EU into national law by July 3, 2017. The rules have applied since January 3, 2018, following a one-year postponement by Directive (EU) 2016/1034. Directive (EU) 2024/2811, part of the Listing Act, has since revised MiFID II, with new rules applying since June 6, 2026.

Who does MiFID II apply to?

Firms in scope

Under Article 1 of the Directive, MiFID II applies to investment firms, market operators, data reporting services providers and third-country firms that provide investment services or perform investment activities through a branch in the Union. Some provisions also apply to credit institutions when they provide investment services or perform investment activities.

Trading venues

The FCA lists three types of trading venue: regulated markets, multilateral trading facilities (MTFs) and organized trading facilities (OTFs). The Directive and the EUR-Lex summary describe them as follows:

  • A regulated market is a multilateral system operated or managed by a market operator that brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments.
  • An MTF is a multilateral system operated by an investment firm or a market operator that brings together multiple third-party buying and selling interests in financial instruments.
  • An OTF is a multilateral system that is not a regulated market or an MTF. In an OTF, multiple third parties buying and selling trading interests in bonds, structured finance products, emission allowances or derivatives are able to interact.

National law and third-country firms

As a directive, MiFID II takes effect through the laws, regulations and administrative provisions that each EU Member State adopts to comply with it. MiFIR also covers the provision of investment services or activities by third-country firms following an applicable equivalence decision.

What MiFID II requires of investment firms: authorization, client protection and reporting

The table shows the main areas and the article each one comes from.

Area What the rules require Where it sits
Authorization Providing investment services as a regular occupation or business on a professional basis is subject to prior authorization by the home Member State's competent authority MiFID II Article 5
Record keeping Firms keep records of all services, activities and transactions that are sufficient for the competent authority to carry out its supervisory tasks MiFID II Article 16
Algorithmic trading Firms that engage in algorithmic trading have effective systems and risk controls MiFID II Article 17
Client protection Firms act honestly, fairly and professionally in accordance with the best interests of their clients MiFID II Article 24
Best execution Firms take all sufficient steps to obtain the best possible result for their clients when executing orders MiFID II Article 27
Transparency Stronger transparency requirements apply before and after financial instruments are traded MiFID II and MiFIR
Transaction reporting Firms report complete and accurate details of transactions as quickly as possible and no later than the close of the following working day MiFIR Article 26

Transaction reporting by the next working day

Under Article 26 of MiFIR, investment firms that execute transactions in financial instruments must report complete and accurate details of those transactions to the competent authority as quickly as possible and no later than the close of the following working day.

Recording calls and electronic communications

Article 16 of the Directive requires investment firms to keep records of all services, activities and transactions that are sufficient to enable the competent authority to fulfil its supervisory tasks. Those records include the recording of telephone conversations or electronic communications relating to, at least, transactions concluded when dealing on own account and the provision of client order services that relate to the reception, transmission and execution of client orders. The rules in Article 16 add that:

  • Conversations and communications intended to result in those transactions or services are included, even if they do not result in them.
  • A firm must take all reasonable steps to record relevant conversations and communications made with, sent from or received by equipment that the firm provides to an employee or contractor or whose use the firm has accepted or permitted.
  • A firm must notify new and existing clients that telephone communications or conversations that result or may result in transactions will be recorded.
  • Clients may place orders through other channels, but those communications must be made in a durable medium such as mails, faxes, emails or documentation of client orders made at meetings.
  • The records are kept for five years and, where the competent authority requests it, for up to seven years.

How MiFID II differs from MiFIR

MiFID II is a directive, so each Member State transposes it into national law. MiFIR is Regulation (EU) No 600/2014, which establishes uniform requirements. The two texts cover different ground.

  • The Directive sets requirements for the authorization and operating conditions of investment firms and for the authorization and operation of regulated markets and data reporting services providers. It also covers supervision, cooperation and enforcement by competent authorities.
  • The Regulation sets uniform requirements for disclosure of trade data to the public, reporting of transactions to competent authorities, trading of derivatives on organized venues and non-discriminatory access to clearing and to trading in benchmarks, among other areas.

How the UK MiFID framework works

UK legislation and rules regulating markets in financial instruments are known as the UK MiFID framework. The FCA explains these requirements for investment firms and trading venues. The framework as onshored commenced in full at the end of the transition period at 11pm on December 31, 2020.

The FCA says the EU MiFID framework was transposed and implemented in the UK by a combination of Handbook rules, Treasury legislation and directly applicable EU regulations, notably EU MiFIR.

For investment firms that undertake investment services and activities, the FCA says the UK MiFID framework sets requirements in several broad areas, including:

  • conditions and procedures for authorization
  • organizational requirements, including rules on handling of client assets
  • conduct of business requirements
  • pre- and post-trade transparency requirements when dealing over-the-counter in financial instruments
  • transaction reporting

FCA transaction reporting and recording rules

The FCA's transaction reporting page says UK MiFIR transaction reports must be submitted following the execution of a transaction in a reportable instrument. Transaction reports include information on the instrument traded, the price and the participants involved. The requirement is in Article 26 of UK MiFIR. The FCA uses transaction reports to detect and investigate market abuse.

In the FCA Handbook, SYSC 10A.1 requires a firm to take all reasonable steps to record telephone conversations and keep a copy of electronic communications that relate to the specified activities in financial instruments. The rule covers communications made with, sent from or received on equipment that the firm provides to an employee or contractor or whose use the firm has accepted or permitted. Records must be kept for five years and, where the FCA requests it, for up to seven years.

A firm must also take all reasonable steps to prevent an employee or contractor from making, sending or receiving relevant telephone conversations and electronic communications on privately-owned equipment that the firm is unable to record or copy.

Email and MiFID II record keeping

Email is one of the durable media for client orders that are not placed by telephone. Article 16 of the Directive and SYSC 10A.1 both say such orders and instructions must be made in a durable medium such as mails, faxes, emails or documentation produced at meetings. For how email retention works across FCA, MiFID II, SRA and GDPR rules, see How UK compliance teams can manage email to meet FCA, MiFID II, SRA and GDPR retention rules.

MiFID II and MiFIR set the rules for firms, venues and reporting, and the UK applies its own version

MiFID II is the EU directive that regulates investment firms, market operators and data reporting services providers, and it has applied since January 3, 2018. It covers firms and trading venues in the EU, plus third-country firms with a branch there. Its requirements include prior authorization, record keeping, client protection and best execution, with MiFIR adding transparency and transaction reporting by the close of the following working day. Firms must take all reasonable steps to record relevant telephone calls and electronic communications, and the records are kept for five years or, where the competent authority requests it, up to seven years. The UK MiFID framework, which commenced in full on December 31, 2020, sets requirements in the same broad areas, including authorization, conduct of business and transaction reporting.