A step closer to a single market for financial services in EU

The proposals, announced today, build upon political decisions taken two years ago by the European Parliament and Council of Ministers.

The objective of the MiFID is to enable investors to invest and procure investment services across EU borders more easily, to remove obstacles to the use of the EU passport by investment firms, to foster competition and a level playing field between Europe’s trading venues, and to ensure appropriate levels of protection for investors and consumers of investment services across Europe.

It is a key part of the Financial Services Action Plan, which seeks to create a single market for financial services in Europe, and is also a response to structural changes in the European securities markets.

MiFID is a so-called Lamfalussy Directive, a type of legislation that follows a process to allow the Council of Ministers and Parliament to focus on key political decisions, while technical implementing details are worked through afterwards.

Accordingly, a Lamfalussy Directive is split into two levels: a "Level 1" Directive which establishes the guiding principles of the legislation agreed in co-decision by the Council of Ministers and European Parliament; and the "Level 2" implementing measures.

MiFID's Level 1 Directive was adopted in April 2004, setting out the basic framework. The European Commission published the first draft of the Level 2 measures today.

Internal Market Commissioner Charlie McCreevy said: "Our draft Level 2 measures matter. They will provide a high level of protection for investors while keeping red tape to a minimum. They will also increase cross-border competition to the benefit of investors and issuers alike. Our aim is to create a level playing field for firms and to provide clarity for investors, while at the same time ensuring that the new rules can be incorporated into national legal systems as Member States demand. I believe that we have accommodated both of these objectives."

He said that the Commission will work closely with the Parliament and the Member States over the next few months to find the widest consensus possible. "Meanwhile, firms should start preparing now for MiFID: there will be a first-mover advantage," he added.

The Level 2 draft measures have been sent to the European Parliament and the European Securities Committee (ESC) who will examine them over the next three months. Following the vote in the ESC, the European Parliament will have a one-month period to check that the limits set in the Level 1 Directive have been respected, before the measures are adopted by the Commission, probably during summer 2006.

A recently approved extension Directive will push back the application date for the Level 1 Directive to November 2007. This is to allow firms to make the necessary preparations.