Updated: October 2019
In our opinion, reforming MiFID II should be a key priority for the new European Commission. ESBG would
encourage a well-thought review of MiFID II taking into account the issues stated above in order to eliminate
the challenges that are counterproductive and do not increase investor protection.
EBSG would suggest to include a further category, between professional investors and retail investors, for
people who are not professionals, but trade very frequently within a certain reference period. A separate,
adjusted set of rules would probably make sense
for both sides to facilitate the trading experience
while ensuring a reasonable level of investor
protection. These investors may not need dozens
of pages containing the exact same information
on a very regular basis (i.e. every time that they
are active on the markets).
We would recommend also reviewing the
requirement to record all telephone conversations
taking into account the downside effects on
customers experienced by ESBG members.
We would suggest that clients should have the
option to waive voice recording.
ESBG identified several issues in the
implementation of MiFID II:
Burden of the requirements from the
clients’ point of view: It appears that the
administrative burden and the additional steps
did not improve the investment experience.
Many clients did not welcome the changes
that MiFID II introduced and complained about
the amount of not always helpful information
they have to go through, in particular ex-ante
and ex-post costs disclosures. Many clients
therefore feel ‘misunderstood’ and wish for
‘opt out’ options. Clients in particular
complained about the amount of not always
helpful (and overlapping) information. They feel
overwhelmed by the sheer amount of
information and would rather have the possibility to waive parts of it. In our opinion, the reduction of
administrative burdens regarding advice given on capital markets products would promote asset accumulation.
Cost of compliance: The enhanced MiFID II investor protection requirements have an effect on the provision
of financial advice to retail investors, and in particular the most modest of them. ESBG has had reports from
small savings banks that the fixed administrative costs of providing financial advice under MiFID II is making
it unsustainable when the amounts invested are low. For this reason, already they are redirecting their clients
towards their online platform where the costs for the intermediary are much lower as it is the only viable
option. This shows that the high regulatory costs triggered by MiFID II come at the expense of clients.
Delay in ordering processes: Members experienced delays in ordering processes, this is particularly
worrying in the context of orders given by telephone because banks are not allowed to execute orders
immediately but only after informing the customer in writing about the cost of the transaction.
Record of telephone conversations: Many clients complain about the new obligation to record telephone
conversations. They feel patronised and feel that the relationship of trust with their advisors has been
Transparency requirements: Under MiFID II, many obligations have been exceeded to transactions with
professional clients. This means that even banks have to be informed about the costs of the transaction.
This information is superfluous since both groups, professional clients and eligible counterparties, are aware
of the costs. The requirements should be limited to retail investors.
SMEs’ initial public offerings (IPOs) and market animation: The availability of Mid Cap Equity Research
guarantees market animation. However, ESBG believes that MiFID II is hurting SME research. Banks need
to receive specific payments for SME research and are prohibited from cross-funding their SME research
via their research on larger listed corporates. Similarly brokers will have to establish a price for investment
research separately from execution services. Asset management firms will also have to develop research
budgets, and either pass the cost of research on to clients via pre-agreed research payment accounts or
absorb the cost of research themselves. Today we see that the main losers are SME listings.
Without transparency investors cannot invest in SMEs. These developments underscore the challenges that
MiFID II creates and we believe that the EU should address them.
ESBG Members have experienced that customers
feel overwhelmed and confused by the excess
of information. Many investors want to decide
for themselves if they wish to do without certain
information (such as constantly repetitive
information on costs) or receive information after -
wards (following telephone orders, for instance).
ESBG is not fully convinced that the current set of
rules gives the right incentives for retail investors
to consider investing their money in the markets
(and providing the real economy with financing
thereby). Quite to the contrary, many clients have
already (partly or complete) withdrawn from capital
markets. This is a very alarming development as
the investment in financial instruments is a very
important aspect of private retirement arrangements
(especially in times when interest rates are
Moreover, ESBG Members are facing high cost of
compliance in order to meet MiFID II and KID
PRIIPs requirements. This would have a great
impact on the financial advice services provided
by local savings and retail banks.
In June 2014, the European Commission adopted new rules revising the Markets in Financial Instruments
Directive (MiFID) framework. These consist of a directive (MiFID II) and a regulation (MiFIR).
MiFID II aims to reinforce the rules on securities markets by ensuring that organised trading takes place on
regulated platforms, introducing rules on algorithmic and high frequency trading, improving the transparency
and oversight of financial markets including derivatives markets and enhancing investor protection. MiFID II
and MiFIR became applicable as from 3 January 2018. The European Commission, taking into consideration
ESMA’s advice, should issue a review of the implementation of the MiFID II by March 2020.