Recent developments in both the UK and the European Union following the Brexit transition have led to significant fluctuations in the application and interpretation of the Markets in Financial Instruments Directive (MiFID) II and Markets in Financial Instruments Regulation (MiFIR).
In the UK, amendments have been conducted under the European Union (Withdrawal Agreement) Act on-shoring process, commonly referred to as “quick-fix” alterations. The early stages of executing the Wholesale Markets Review’s conclusions have also been noted. The most immediate amendments are included in the The Financial Services and Markets Act (FSMA) 2023 and the Commencement No. 1 Regulations, proposing transitional alterations to UK MiFIR from August 29, 2023.
In the EU, similar quick-fix reforms were introduced. Drastic changes have been noticed in the way both the UK and EU adapt to the MiFID rules amidst the evolving landscape. With the foundations of MiFID II/MiFIR set up under shared UK and EU membership, the UK’s departure and parallel amendments have resulted in a potential divergence of standards in the financial markets of both territories.
Given the strategic importance of the financial sectors in both the UK and EU, maintaining open and secure markets is critical. The potential divergence in MiFID II/MiFIR interpretation and execution could result in both entities struggling to harmonize their financial markets, potentially affecting the ease and cost of cross-border transactions. The evolving scenario calls for consistent evaluation and discussion and further highlights the importance of international cooperation amongst the regulatory authorities.
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