The Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFIR) form the core of the EU’s legal framework for financial markets. Together, they aim to increase market transparency, improve investor protection, and harmonise rules across Member States. The framework regulates how financial instruments — including energy and commodity derivatives — are traded, reported, and supervised across the EU.
On 28 March 2024, a major reform package entered into force, amending both MiFID II and MiFIR (Directive (EU) 2024/790 amending MiFID II and Regulation (EU) 2024/791 amending MiFIR). While the legal acts remain in place, the scope of changes is so substantial that stakeholders often refer to this as “MiFID III” and “MiFIR II.”
Key changes include
- MiFIR changes apply directly across the EU, while MiFID II changes must be transposed by 29 September 2025
- Introduction of an EU-wide Consolidated Tape for equity and bond markets, with full rollout expected by 2026
- A new Designated Publishing Entity (DPE) regime for OTC trade transparency, operational from 3 February 2025
- Phasing out of the mandatory Systematic Internaliser (SI) regime
- Simplified equity transparency rules, replacing the double volume cap with a single 7 percent cap under the reference price waiver
- An EU-wide ban on Payment for Order Flow (PFOF), with limited transitional allowances in place until June 2026
- No further changes to the commodity derivatives position limit regime, which remains as revised in 2021
Key Milestones
- 2007 – Original MiFID I enters into force
- 2014 – MiFID II and MiFIR adopted as part of post-financial crisis reforms
- 2018 – MiFID II and MiFIR become applicable
- 2021 – MiFID “Quick Fix” adopted to ease burdens during the COVID-19 pandemic, including adjustments to position limits, hedging exemptions, and ancillary activity criteria
- 2024 – MiFID II/MiFIR review adopted (commonly referred to as “MiFID III / MiFIR II”), with full implementation expected by 2026
MiFID II and MiFIR are directly relevant for energy traders, exchanges, and clearing houses, as they classify most energy commodity derivatives — including gas, electricity, and EU ETS emission allowances — as financial instruments. This brings energy trading under financial market regulation, with implications for:
- Position limits and position management obligations
- Pre- and post-trade transparency requirements
- Transaction reporting and regulatory oversight
- Compliance with market structure rules for trading venues
- Applicability of hedging exemptions and the ancillary activity test for non-financial entities
For participants in European energy markets, a clear understanding of MiFID II and MiFIR is essential to ensure compliance, manage regulatory risk, and maintain uninterrupted access to trading platforms.