MiFID II : Markets in Financial Instruments Directive
The EU's revised Markets in Financial Instruments Directive (MiFID) and Markets in Financial Instruments Regulation (together MiFID II) is live since 3 January 2018.
What is MiFID II?
In order to remedy deficiencies highlighted by the 2008 financial crisis and to take into account the evolution of financial markets, European authorities have started since 2011 the review of the existing MiFID provisions. As a consequence, new pieces of legislation were adopted in May 2014 with the aim to improve financial markets' transparence and resilience, and to strengthen customers' protection.
Key aspects of MiFID II are:
- Strengthened pre- and post-trade transparency requirements for shares and similar financial instruments, as well as for "non-equity" financial instruments such as derivatives and bonds. Investment firms who have adopted the status of Systematic Internaliser will provide transparency, under certain conditions, on financial instruments which are admitted to trading on a trading venue (RM, MTF or OTF).
- Derivatives subject to clearing obligations that are deemed liquid by ESMA will have to be traded on platform.
- Reporting of transactions to the regulators will be strengthened. Its scope will be broader and the number of data fields to report will increase.
- New financial product governance obligations, which define the responsibilities of the product manufacturers and distributors.
- Investment firms will have to communicate more information to their clients.
- The strengthening of existing requirements related to remunerations and inducements. In this regard, the possibility for investment firms to pay/provide or being paid/provided monetary or non-monetary benefits to/from a third-party will be subject to stricter conditions.
Under MiFID II, HSBC is required to disclose any fees, commissions or non-monetary benefits (known as inducements) it may pay or receive to and from an affiliate or other third party, and how it will disclose these inducements. You will be provided with separate disclosure of the essential arrangements relating to such fees, commissions or non-monetary benefits where HSBC is required to do so.
Situations can arise where the interests of HSBC, or those of its staff, conflict with your interests or where your interests compete with those of other clients of HSBC. These conflicts are managed in accordance with the conflicts of interest policy (PDF, 149KB) of HSBC.
At HSBC, we are committed to providing you with the best customer experience we can. We encourage you to let us know, as soon as possible, whenever our products or services do not meet your expectations so we may promptly address your concerns.
Details of how complaints are handled are available under the complaints handling policy (PDF, 111KB) of HSBC.
HSBC is aware of the clarification provided by ESMA on 26 September 2018 regarding reporting obligations under MiFID II (RTS22 and RTS23 Reporting) and EMIR (Trade Reporting) and has considered the implications of this guidance. This notice sets out how we treat such forwards for purposes of reporting required by various regulations.
- HSBC offers clients the ability to simultaneously trade two independent FX Forwards as a single package; we offer this for purposes of pricing and booking convenience.
- HSBC does not provide liquidity in Single FX Swap instruments (single instruments executed as FX swap points with one ISIN), unless on a pre-agreed basis.
Going forwards HSBC will continue to support trading of two FX Forwards as a strategy of two independent trades, legally confirmed independently with a separate confirmation for each FX Forward leg and represented for MiFID and EMIR reporting purposes with two ISINs and two Unique Trade Identifiers. HSBC will include a package identifier on each leg and will continue to report the near leg of these strategies regardless of tenor. This includes, but is not limited to, where HSBC trades with you as a Systematic Internaliser. HSBC believes this is the best approach to achieve global consistency with other major reporting regulations, ensures clarity for counterparties, clients and regulators and aligns with the intended outcome of the ESMA Q&As.
