The scope of the 2014 MiFID II is organized on a functional basis. It applies to the provision
of'investment services and activities', and is not dependent on the organizational or legal status of the
provider. The application of MiFID II does not depend on whether the provider is, for example, a credit
institution, a multifunction investment firm, an asset manager, or a specialist investment firm. This
approach dovetails with the structure of the EU investment services industry and has long been a
feature of the EU regulation-since the 1993 ISD133-but it also dovetails with the crisis-era concern to
deploy functional regulation which insures against regulatory gaps.
1.'Transferable securities’ under MiFID II mean those classes of securities which are negotiable on the
capital market, with the exception of instruments of payment, such as:
(a) shares in companies and other securities equivalent to shares in companies, partnerships or other
entities, anddepositary receipts in respect of shares;
(b) bonds or other forms of securitised debt, including depositary receipts in respect of such securities;
(c) any other securities giving the right to acquire or sell any such transferable securities or giving rise to
a cash settlement determined by reference to transferable securities, currencies, interest rates or yields,
commodities or other indices or measures (Article 4(1)(44) MiFID II).
2. Money Market instruments: ESMA states that money market instruments shall be treasury bills,
certificates of deposits, commercial papers (all short term certificates issued by governments or
companies) and other instruments with substantially equivalent features that
- have a value that can be determined at any time;
- are not derivatives; and
- have a maturity at issuance of 397 days or less.
3. Units in collective investment undertakings;
Investment funds, represent more tan 75% of small investor capital in EU. High liquidity, low agency
costs, Access to high capital investments with low entry
(5) Options, futures, swaps, forwards and any other derivative contracts relating to commodities that
must be settled in cash or may be settled in cash at the option of one of the parties other than by
reason of default or other termination event;
(6) Options, futures, swaps, and any other derivative contract relating to commodities that can be
physically settled provided that they are traded on a regulated market, a MTF, or an OTF, except
for wholesale energy products traded on an OTF that must be physically settled;
(7) Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that
can be physically settled not otherwise mentioned in point 6 of this Section and not being for
commercial purposes, which have the characteristics of other derivative financial instruments;
(8) Derivative instruments for the transfer of credit risk;
(9) Financial contracts for differences;
(10) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to
climatic variables, freight rates or inflation rates or other official economic statistics that must be
settled in cash or may be settled in cash at the option of one of the parties other than by reason of
default or other termination event, as well as any other derivative contracts relating to assets, rights,
obligations, indices and measures not otherwise mentioned in this Section, which have the
characteristics of other derivative financial instruments, having regard to whether, inter alia, they are
traded on a regulated market, OTF, or an MTF;
(11) Emission allowances consisting of any units recognised for compliance with the requirements of
Directive 2003/87/EC (Emissions Trading Scheme).
Contracts having the characteristics of other financial instruments under MiFID II
For more extensive comments on this thread see:
- contracts having the "characteristics of other derivative financial instruments",
- the third limb of the trading criterion of the financial instrument's definition 'contracts equivalent to
a contract traded on a regulated market, an MTF, an OTF contract or such a third country trading
venue'.
Financial instruments’ categorisation
Financial instruments can be categorised according to various sets of criteria. Annex I to
the Commission Delegated Regulation (EU) 2017/576 of 8 June 2016 supplementing Directive
2014/65/EU of the European Parliament and of the Council with regard to regulatory technical
standards for the annual publication by investment firms of information on the identity of execution
venues and on the quality of execution enumerates, for example, the following classes of financial
instruments:
(a)
Equities
—
Shares
&
Depositary
Receipts
(i)
Tick
size
liquidity
bands
5
and
6
(from
2
000
trades
per
day)
(ii) Tick size liquidity bands 3 and 4 (from 80 to 1 999 trades per day)
(iii) Tick size liquidity band 1 and 2 (from 0 to 79 trades per day)
(b) Debt instruments
(i)
(ii) Money markets instruments
Bonds
(c)
Interest
(i)
Futures
and
options
admitted
to
(ii) Swaps, forwards, and other interest rates derivatives
(d)
credit
(i)
Futures
and
options
admitted
to
(ii) Other credit derivatives
(e)
currency
(i)
Futures
and
options
admitted
to
(ii) Swaps, forwards, and other currency derivatives
rates
trading
on
a
derivatives
trading
venue
trading
on
a
derivatives
trading
venue
trading
on
a
trading
trading
on
a
trading
derivatives
venue
(f) Structured finance instruments
(g) Equity Derivatives
(i)
Options
and
Futures
admitted
(ii) Swaps and other equity derivatives
to
venue
(h)
(i)
Warrants
(ii) Other securitized derivatives
Securitized
and
Certificate
Derivatives
Derivatives
(i)
Commodities
derivatives
and
emission
allowances
Derivatives
(i)
Options
and
Futures
admitted
to
trading
on
a
trading
venue
(ii) Other commodities derivatives and emission allowances derivatives
(j) Contracts for difference
(k) Exchange traded products (Exchange traded funds, exchange traded notes and exchange traded
commodities)
(l) Emission allowances
(m) Other instruments