The EU MiFID II regime was onshored in the UK post-Brexit, with some adjustments to make the regime operate properly from a UK-only perspective.

Does MiFID II Apply in the UK?

The Markets in Financial Instruments Directive (MiFID) is a European Union (EU) regulation that governs financial markets and services. It aims to harmonize regulations across EU member states and provide greater transparency and investor protection.

MiFID II is an updated version of the directive, which came into effect on January 3, 2018. It introduced several new requirements, including stricter rules on transparency, investor protection, and market structure.

Following the Brexit referendum in June 2016, the United Kingdom officially left the EU on January 31, 2020. As a result, some EU regulations, including MiFID II, no longer automatically apply to the UK.

However, the UK government has incorporated MiFID II into domestic law through the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019. This means that the majority of MiFID II provisions continue to apply in the UK even after Brexit.

The UK’s decision to maintain MiFID II was driven by various factors. Firstly, it ensures continued access to EU markets for UK-based financial firms. To maintain “equivalence” with EU regulations, the UK must adopt comparable rules, and preserving MiFID II helps achieve this goal.

Secondly, MiFID II has generally been regarded as a positive regulatory framework for financial markets, promoting transparency, investor protection, and fair competition. By retaining these standards, the UK aims to maintain its reputation as a global financial center and attract international investors.

It’s worth noting that the UK now has the authority to make changes to the MiFID II rules as it sees fit. The government has indicated its intention to conduct a review of the regulations to ensure they are tailored to suit the UK’s specific needs and to foster innovation.

In summary, despite leaving the EU, MiFID II continues to apply in the UK. This decision helps maintain access to EU markets and upholds regulatory standards. The UK government may make future amendments to the regulations to align them with its domestic priorities.