Markets in financial instruments and investment services

Markets in financial instruments and investment services

Outline of the Community (European Union) legislation about Markets in financial instruments and investment services


These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Markets in financial instruments (MiFID) and investment services

Document or Iniciative

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC [Official Journal L 145 of 30.4.2004]. [See amending acts].


In accordance with the Financial Services Action Plan, the EU has adopted a Directive designed to strengthen the Community legislative framework for investment services and regulated markets with a view to furthering two major objectives:

  • to protect investors and safeguard market integrity by establishing harmonised requirements governing the activities of authorised intermediaries;
  • to promote fair, transparent, efficient and integrated financial markets.

Authorisation conditions and procedures

The Directive requires the Member States to harmonise the rules governing investment services and activities. To that end, the Member States must set up an authorisation system enabling investment firms to operate throughout the EU. These firms must be registered and the register must be accessible to the public. Each authorisation is notified to the European Securities and Markets Authority (ESMA).

ESMA is able to develop draft regulatory technical standards. Furthermore, it assists the Commission in its relations with third countries and in assessing their markets.

In other words, the Directive must allow investment firms, banks and stock exchanges to offer their services across borders on the basis of the authorisation issued by the competent authority of their home Member State *. Since authorisation is subject to the same conditions in all the Member States, it will promote the harmonisation of rules governing investment firms.

In this context, the Directive is intended to align national rules governing the provision of investment services and the operation of stock exchanges, with the ultimate aim of creating a single European “securities rule book” *. It will benefit investors, issuers and other market stakeholders by promoting efficient and competitive markets.

Prudential assessment

This Directive is also intended to establish the harmonisation of the assessment rules of procedure and criteria for the acquisition of a qualifying holding *. Its objectives include the maximum harmonisation of the notification thresholds for an envisaged acquisition or the disposal of a qualifying holding, and the maximum harmonisation of the assessment procedure and the list of assessment criteria.

In the context of an envisaged acquisition, the prudential assessment of the shareholders and of management fulfils detailed criteria and is conducted jointly by the competent authorities.

The Directive states in particular that the competent authorities judge the appropriateness of the proposed acquirer and the financial soundness of the envisaged acquisition on the basis of:

  • the reputation and experience of those who direct the business of the insurance company following the envisaged acquisition;
  • the financial soundness of the proposed acquirer;
  • the existence of reasonable grounds to suspect an operation or attempt to launder money or finance terrorism.

Investor protection

The Directive will considerably enhance investor protection by setting business of conduct rules for providing investment services to clients and minimum standards for the mandate and powers that national competent authorities must have at their disposal. It also establishes effective mechanisms for real-time cooperation in investigating and prosecuting breaches of the rules.

Transparency and market integrity

The Directive creates an obligation to safeguard market integrity, to report transactions and to keep records. ESMA has access to this information.

In particular, it establishes a pre-trade transparency obligation. This requires “internalisers” (i.e. firms dealing on own account * by executing client orders outside regulated markets or multilateral trading facilities *) to disclose the prices at which they will be willing to buy from and/or sell to their clients. However, it limits this disclosure obligation to transactions not above standard market size, defined as the average size of orders executed in the market.

Each Member State is responsible for establishing a list of regulated markets and communicating this to the other Member States and ESMA.

This means that European wholesale markets will not be subject to the pre-trade transparency rule and that wholesale broker-dealers will not be exposed to significant risks in their role as market makers.

Operator protection

The Directive includes a set of protective measures for “internalisers” when they are obliged to quote, so that they can provide this essential service to clients without running undesirable risks. These measures include the possibility of updating and withdrawing quotes.

The Directive also establishes a fair market for retail investors. It prevents financial institutions from discriminating between such investors, e.g. by offering some of them improvements to publicly quoted prices.

Appointing competent authorities

Member States must appoint their competent authorities and send the necessary information to the Commission, ESMA and the competent authorities of the other Member States. The competent authorities act as a point of contact in the Member States. ESMA keeps a list of these authorities up-to-date. These authorities are required to cooperate closely with ESMA.

Member States and ESMA may conclude cooperation agreements concerning:

  • the supervision of credit institutions;
  • the procedures of liquidation and bankruptcy of firms;
  • the procedures for statutory audits of the accounts of investment firms;
  • the supervision of bodies involved in the procedures of liquidation and bankruptcy of investment firms;
  • the supervision of persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions.

Final provisions

The Directive is designed to improve the Community rules on securities markets. It therefore sets out the general obligations which Member State authorities must enforce.

Implementing measures, reports and reviews will be adopted by the Commission following consultations with market participants from the Member States and taking into account the opinion of the Committee of European Securities Regulators.

Key terms used in the act
  • Home Member State: for an investment firm: if the investment firm is a natural person, the Member State in which its head office is situated; if it is a legal person, the Member State where its registered office is situated or the Member State where its head office is situated (if, under national law, the legal person does not have a registered office). For a regulated market: the Member State in which the regulated market is registered or, if under the law of that Member State it has no registered office, the Member State in which its head office is situated.
  • Transferable securities: those classes of securities which are negotiable on the capital market, with the exception of instruments of payment, such as: shares in companies and other securities equivalent to shares in companies, partnerships or other entities, and depositary receipts in respect of shares; bonds or other forms of securitised debt, including depositary receipts in respect of such securities; any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures.
  • Qualifying holding: any direct or indirect holding in an investment firm which represents 10 % or more of the capital or of the voting rights, or any other possibility of exercising a significant influence over the management of the investment firm in which that holding subsists.
  • Dealing on own account: trading against proprietary capital resulting in the conclusion of transactions in one or more financial instruments.
  • Multilateral trading facility (MTF): a multilateral system, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments – in the system and in accordance with non-discretionary rules – in a way that results in a contract.


Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2004/39/EC



OJ L 145, 30.4.2004

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2006/31/EC



OJ L 114, 27.4.2006

Directive 2007/44/EC



OJ L 247, 21.9.2007

Directive 2008/10/EC


OJ L 76, 19.3.2008

Directive 2010/78/EU



OJ L 331, 15.12.2010

Successive amendments and corrections to Directive 2010/78/EU have been incorporated in the basic text. This consolidated version is for reference purpose only.

Related Acts

Proposal for a Directive of the European Parliament and of the Council on Alternative Investment Fund Managers and amending Directives 2004/39/EC and 2009/…/EC [COM(2009) 207 final – Not published in the Official Journal].
This Proposal aims to establish regulatory and supervisory standards for hedge funds, private equity and other systemically important market players. The Proposal meets the need to strengthen the regulation and oversight of managers following the financial turbulence of 2007-2008.
It applies to managers managing alternative fund portfolios with assets of at least Euro 100 million.
It defines a framework relating to:

  • rights and obligations of managers;
  • operating conditions and initial authorisation in relation to liquidity;
  • treatment of investors;
  • supervisory cooperation information sharing and mediation.

Codecision procedure (2009/0064/COD)

Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive [Official Journal L 241 of 2.9.2006].
The purpose of this Directive is to establish a harmonised framework of organisational requirements and operating conditions for investment firms.

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