MiFID

OVERVIEW

MiFID 2 is an EU directive, which classifies emission allowances as financial instruments.
Below we have collected some topics based on the questions our clients are asking from us.

What is MiFID 2 and MiFIR? (Last update: 28/08/2017)

MiFID 2 is the abbreviation of the Directive 2014/65/EU of the European Parliament and the Council of 15th May 2014 on markets in financial instruments. As a directive it has to be implemented into the local law, and the local law is applicable for the market players based in a given country. The implementation deadline of MiFID is 3rd July 2017, therefore in most of the countries the local version is already available (status report).

MiFIR is the abbreviation of the Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15th May 2014 on markets in financial instruments. As a regulation, it is directly applicable for all market players in the EU.

MiFID 2 and MiFIR build on the rules set by MiFID 1. Due to the fast-changing business environment and the financial crises it was necessary to improve the client protection, the resilience and the transparency on the financial market. The law is applicable as of 3rd January 2018.

Why MiFID 2 is important for emissions trading? (Last update: 28/08/2017)

MiFID 2 lists “Emission allowances consisting of any units recognised for compliance with the requirements of Directive 2003/87/EC (Emissions Trading Scheme)” among the financial instruments, in its Annex 1, Section C. 

How can MiFID 2 affect my company? (Last update: 28/08/2017)

If you are exempted from complying with MiFID 2, you will only benefit from it. Similarly, to the security checks at the airports it serves your interest and security, but you may find it slow and boring sometimes. The law will make trading more secure and transparent for you, but the negative effect is that trading companies are going to be obliged to do more administration, and have to ask more documents and questions from you. 

Most companies who have to comply with the EU ETS are exempted from MiFID 2 when trading with emission allowances, based on Article 2 (1) (e) of the Directive: 

“operators with compliance obligations under Directive 2003/87/EC who, when dealing in emission allowances, do not execute client orders and who do not provide any investment services or perform any investment activities other than dealing on own account, provided that those persons do not apply a high-frequency algorithmic trading technique;”

However, we advise, to check the transposed version of MiFID 2, in your local law, because transposition may be different in each country. Keep in mind, that the directive is not directly applicable for you, but its transposed version in the local law. 

We would highlight, that even if trading with emission allowances is exempted, it doesn’t necessary mean, that trading with its derivatives (forwards and options) is also exempted. 

Also please note, that if you trade not only for yourself but on behalf of a group, the exception may not be applicable. In this case we suggest you to check Article 2 (1) (j) of of the Directive and the Commission Delegated Regulation (EU) 2017/592. This latter is a regulation, which is directly applicable in all Member States, therefore won’t be transposed to the local law.  

What is the LEI number? (Last update: 28/08/2017)

The LEI is the Legal Entity Identifier, a unique code, provided for companies. The Local Operating Units (or LOUs) are issuing LEI numbers; you have to apply there to get your LEI number, or if you need help, you can contact us as well.

As the LEI expires every year, please keep an eye on it and make sure that your LEI is always valid. We expect the LOUs to slow down due to the extra work-load that MiFID 2 puts on them, therefore we suggest to apply for the LEI as soon as you can.

disclaimer

Important Information:
The information and opinions in this communication were prepared in good faith by Vertis Environmental Finance. Vertis Environmental Finance makes no representation or warranty either express or implied as to the accuracy or completeness of such information and expressly disclaims any warranties of merchantability, fitness for any particular purpose or use with respect to the data included in herein. This communication is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or to sell any instruments or to participate in any trading strategy.
It is the responsibility of each interested party to make their own enquiries that the information provided is appropriate to their individual circumstances in addition to any legal, regulatory, tax or other implications for themselves or their business.
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