MiFID II: Key issues for corporate users of derivatives

The Markets in Financial Instruments Directive II and the Markets in Financial Instruments Regulation (together “MiFID II”) will repeal and recast the Markets in Financial Instrument Directive (MiFID I) with effect from 3 January 2018. From that point, MiFID II will be the EU legislation that, amongst other things, provides the regulatory framework for firms which provide investment services or perform investment activities in respect of ‘financial instruments’.

The changes made by MiFID II will have limited or no application for the vast majority of non-financial corporate entities, as they will most directly affect investment firms, trading venues and other financial entities. However, for certain corporate users of derivatives, especially commodity derivatives, emissions allowances and related derivatives, the rules may impact the way they carry out their business and may, for example, require regulatory notifications to be made. This briefing covers some of the key issues under MiFID II which may affect non-financial corporate entities (such as the expanded scope of derivatives covered by MiFID II, classification of FX forwards, exemption to authorisation, position limits and the mandatory trading obligation).