Some of the key areas of MiFID II/MiFIR for asset managers to consider

Inducements and payment for research

Article 24 of MiFID II prohibits investment firms providing portfolio management services, or investment advice on an independent basis, from accepting fees, commission or any monetary or non-monetary benefits from third parties in relation to the provision of services to clients. This includes research. 

Research may only be received if it is paid:

  • by the investment firm itself, or
  • from a separate research payment account (RPA) funded by a specific research charge to the client

Transaction reporting

MiFIR broadens the transaction reporting requirements, not only in relation to what information needs to be detailed in the report but also the scope of financial instruments that need to be reported and the events that trigger the requirement to report.

Article 26(1) of MiFIR requires a transaction report to be made where an investment firm ‘executes’ a ‘transaction’. What amounts to execution for these purposes is broad and includes, amongst other activities, the receipt and transmission of orders. A transaction is defined as the ‘acquisition, disposal or modification of a reportable financial instrument’ and is therefore broader in scope than the traditional definition of transaction.

Best execution

Under MiFID II, investment firms, when executing client orders, must take ‘all sufficient steps’ to obtain best execution, whereas under MiFID I firms had to take ‘all reasonable steps’, meaning a higher compliance standard is now required.

Further, pursuant to Article 24(6) of MiFID II firms who execute client orders must report the top five execution venues in terms of trading volume and on quality of execution received.

Product governance

Articles 16(3) and 24(2) of MiFID II introduce detailed product governance requirements, which form part of the larger MiFID II investor protection package. The requirements apply to MiFID investment firms that ‘manufacture’ financial instruments and/or ‘distribute’ financial instruments or services to clients and apply irrespective of the clients’ categorisation.


MIFID II and MiFIR have introduced both mandatory trading obligations for shares and certain derivative contracts and a new type of trading venue, an organised trading facility or ‘OTF’ (a new non-equity multilateral trading system).

Post-trade transparency

The volume, price and conclusion time of transactions, in both equity and non-equity instruments (that are traded on a trading venue), are required to be publicly reported once per transaction. Where such transactions are entered into by two investment firms in over-the-counter (OTC) transactions, it is the responsibility of the systematic internaliser (SI) or, if neither party is an SI, the seller to report.

Where asset managers are trading with EU investment firms, it is predominantly the case that the asset manager will be the buyer and therefore can rely on its counterparty to perform the post-trade transparency. However, the asset manager will be responsible for post-trade publication where the asset manager is:

  • transacting with a non-EU counterparty, or
  • involved in agency cross-trades (acting on behalf of both transaction parties, and thus a seller.

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