MiFID II / MiFIR

Implement algorithmic trading + High Frequency Trading + Direct Electronic Access + market making + tick size requirements under MiFID II Article 17 + RTS 6 + RTS 7 + RTS 8 + RTS 11 + Commission Delegated Regulation (EU) 2017/566. Article 17 algorithmic trading definition (computer algorithm determines individual parameters of orders) + HFT definition (high message intraday rate + co-location + low latency). Algorithmic trading firms must have effective systems + risk controls + business continuity + adequate testing + post-implementation review + risk monitoring + circuit breakers + flagging of algorithmic orders to NCAs + record keeping of algorithms 5 years + RTS 6 organisational requirements. Direct Electronic Access (DEA) Article 17(5) including Sponsored Access + Direct Market Access (DMA) - firms providing DEA must have effective systems + risk controls + due diligence on clients

• Algorithmic trading risk control framework + RTS 6 organisational requirements
• Algorithm flagging of orders to NCAs + RTS 6
• Algorithm record keeping 5 years + change control + testing evidence
• HFT regime compliance for firms meeting thresholds
• Direct Electronic Access binding written agreement + client due diligence + risk controls + suspension process (Article 17(5))
• Market making written agreement with venue + continuous quotation evidence (Article 17(3) + RTS 8)
• Tick size regime compliance (Article 49 + RTS 11)
• Synchronised business clocks (Article 50 + RTS 25)

• Algorithm testing not refreshed before deployment
• DEA agreements lack suspension provisions
• Market making continuous quotation not consistently met
• Synchronised business clocks not UTC-traceable to required precision

Implement best execution requirements under MiFID II Article 27 + Commission Delegated Regulation 2017/565 Articles 64-66 + RTS 27 (abolished 2024 Review) + RTS 28. Article 27(1) take all sufficient steps to obtain best possible result for clients taking into account price + costs + speed + likelihood of execution and settlement + size + nature + any other consideration relevant to execution of order. For retail clients best possible result determined in terms of total consideration (price + execution costs) unless overriding qualitative factor. Order Execution Policy (Article 27(4)-(5)) + sufficient information about policy + prior express consent (Article 27(5)). Order handling Article 28 + Articles 67-70 Commission Delegated Regulation 2017/565 + prompt fair expeditious execution of comparable client orders + best interests of client + management of partially filled orders + allocatio

• Order Execution Policy with execution factors weighting + venues + class of instruments
• Top 5 execution venues per class report (RTS 28 + Article 27(6))
• Execution quality monitoring with venue + price + cost + speed + likelihood + size analysis
• Order handling procedure including comparable orders + partial fills + allocation
• Client express consent to Order Execution Policy + venue list
• Note RTS 27 quarterly execution quality reports abolished by 2024 Review - confirm no production

• Best execution monitoring relies on venue self-reports without independent analysis
• Order Execution Policy stale and not refreshed annually
• Total consideration test for retail not consistently applied
• Order allocation methodology not documented

Implement Client Categorisation + Suitability + Appropriateness requirements under MiFID II Article 25 + Article 30 + Annex II + Commission Delegated Regulation 2017/565 Articles 54-55. Three client categories: (1) Retail (default + highest protection); (2) Professional per se (Annex II Section I - regulated firms + large undertakings meeting size criteria + public entities + institutional investors); Professional on request elective Annex II Section II (subjective + objective tests including 10 large transactions in last year + portfolio EUR 500K + 12 months work in financial sector); (3) Eligible Counterparty (ECP) per Article 30 + Annex II Section II (regulated firms only + opt-down available). Suitability Article 25(2) for investment advice + portfolio management - obtain client information on knowledge experience + financial situation including ability to bear losses + investment ob

• Client categorisation records (retail + professional per se + professional elective + ECP) per Annex II + Article 30
• Suitability assessment files for investment advice and portfolio management + suitability statements (Article 25(2))
• Appropriateness warnings for non-complex execution-only (Article 25(3))
• Costs and charges ex-ante and ex-post disclosure (Article 24(4))
• Information about firm + nature of advice + independent vs non-independent declarations
• Periodic reports (Article 25(6)) including quarterly portfolio statements

• Professional elective categorisation without objective test evidence (10 transactions + EUR 500K + 12 months sector)
• Suitability statements missing or generic
• Ex-ante costs and charges based on illustrative rather than actual data
• Retail clients not given periodic statements

Implement conflicts of interest + inducements + product governance under MiFID II Articles 23 + 24(7)-(9) + 16(3) + Commission Delegated Directive (EU) 2017/593. Conflicts of Interest Article 23 + Commission Delegated Regulation 2017/565 Articles 33-35 - identify + prevent + manage + disclose conflicts including between firm and clients + between clients + between management body + research function + own account dealing + outside business interests. Inducements Article 24(7)-(9) - BAN for independent investment advice and portfolio management on receiving or paying any fees commissions monetary or non-monetary benefits from third parties + ban on retention even with disclosure. For non-independent advice and other services - quality enhancement test + reasonable demonstration that inducement does not impair duty to act in best interests of client + extensive disclosure. Research unbundl

• Conflicts of interest policy + register + disclosures (Article 23 + Articles 33-35 Commission Delegated Regulation 2017/565)
• Inducement ban evidence for independent advice and portfolio management + quality-enhancement test files for non-independent (Article 24(7)-(9))
• Research payments via Research Payment Account (RPA) or P&L absorption (Article 13 Commission Delegated Directive 2017/593)
• Product governance target market identification + product testing + scenario analysis + distribution strategy + ongoing review per manufacturer + distributor (Article 16(3) + Articles 9-10 Commission Delegated Directive 2017/593)
• Payment for Order Flow (PFOF) prohibition compliance (2024 Review for retail)

• Inducement quality-enhancement test purely formal without enhancement evidence
• Research unbundling not refreshed for 2024 reversal for SMEs + fixed income
• Product governance ongoing review skipped
• PFOF still received from retail post 2024 Review

Implement MiFID II / MiFIR enforcement and product intervention regime under Articles 69-72 MiFID II + Articles 40-43 MiFIR. NCA supervisory powers Article 69 MiFID II including investigation + on-site inspections + suspend authorisation + cease and desist + freeze assets + temporary ban on management + intervention in commodity derivatives. Article 70 administrative sanctions including: cease and desist + public censure + withdrawal of authorisation + ban on management + monetary administrative sanctions up to maximum of EUR 5,000,000 for individuals + EUR 5,000,000 or 10% of total annual turnover for legal persons (whichever higher) + twice the amount of profits gained or losses avoided + ESMA may apply administrative sanctions to specific firms. Criminal sanctions where Member States choose. Article 71 mandatory publication of decisions including identity of person sanctioned + nature

• NCA supervisory engagement and review evidence
• Article 70 penalty exposure assessment (EUR 5M + 10% turnover whichever higher + twice profits + criminal where Member State chose)
• Article 71 publication response plan
• ESMA + NCA product intervention monitoring (MiFIR Articles 40-42 binary options + leveraged contracts for difference + CFD + crypto-asset)
• Article 88 third-country authority cooperation
• Whistleblowing channel + reporter protection (Article 73)
• Cross-walk to ESMA Q&A + Guidelines + Common Supervisory Actions

• EUR 5M + 10% turnover exposure not refreshed annually
• Article 71 publication preparedness missing
• Product intervention monitoring not unified across NCAs
• ESMA Common Supervisory Action (CSA) not factored into review plan

Implement governance + organisational + compliance + outsourcing requirements under MiFID II Articles 8-13 + Article 16 + Article 22. Management body composition (Article 9) - sufficient time + collective knowledge skills experience + commitment + diversity policy + nomination committee for significant firms. Fit and proper requirements (Article 9(1) + Articles 10-12). Organisational requirements (Article 16) including risk management framework + segregation of duties + IT systems + business continuity + record keeping (Article 16(6)-(7) including telephone recording 5-year minimum 7-year on NCA request) + safeguarding client funds and assets (Article 16(8)-(9) + Title II Commission Delegated Directive 2017/593). Outsourcing (Article 16(5) + Commission Delegated Regulation 2017/565 Articles 30-32) covering critical or important operational functions + due diligence + written agreement +

• Management body composition + fit and proper records + nomination committee minutes (Articles 8-13)
• Risk management framework + 3 lines of defence + ICAAP / ILAAP cross-walk
• Outsourcing register including critical/important functions + due diligence + cloud outsourcing per ESMA 2021 Guidelines + Article 16(5)
• Compliance function annual report to management body (Article 22)
• Telephone recording 5-year minimum 7-year on NCA request evidence (Article 16(7))
• Whistleblowing channel under Article 73 + EU Whistleblower Directive transposition

• Telephone recording retention under 5 years (Article 16(7) breach)
• Cloud outsourcing not assessed against ESMA Guidelines 2021
• Compliance function lacks independence or authority
• Whistleblowing channel not anonymous

Implement MiFIR transparency + trading obligation + transaction reporting under Regulation 600/2014 Articles 3-27 + RTS 1-2 + RTS 22 + RTS 24. Pre-trade transparency: Articles 3-4 (equity instruments - trading venues publish current bid and offer prices and depth + RTS 1) + Articles 8-9 (non-equity - bonds + structured finance + emission allowances + derivatives + RTS 2). Post-trade transparency: Articles 6-7 (equity + RTS 1) + Articles 10-11 (non-equity + RTS 2) - publish price + volume + time of transactions as close to real time as possible (within 5 minutes for equity + 15 minutes for non-equity). Waivers under Article 4(1) and Article 9(1) including large in scale (LIS) + size specific to instrument (SSTI) + Reference Price Waiver + Negotiated Trade Waiver + Order Management Facility. Trading Obligation: Article 23 shares (only on trading venues or SIs) + Article 28 derivatives subj

• Pre-trade transparency publication evidence (Articles 3-4 + 8-9 + RTS 1-2)
• Post-trade transparency publication within 5 minutes equity + 15 minutes non-equity (Articles 6-7 + 10-11)
• Waiver applicability analysis (LIS + SSTI + Reference Price + Negotiated Trade + Order Management Facility)
• Transaction reporting T+1 evidence via ARM under Article 26 + RTS 22 with 65 fields + LEI + ISIN + trading capacity + waiver + investment decision flags
• Order record keeping under Article 25 MiFIR + RTS 24
• Consolidated Tape Provider (CTP) integration for equity post-trade tape (2025+)

• Transaction reporting field completeness issues (decision-maker LEI + trading capacity + waiver flags)
• Post-trade transparency delays beyond 5/15 minutes
• Waiver invoked without applicability analysis
• Order record keeping under 5 years

Establish the legal foundation of EU MiFID II (Directive 2014/65/EU) and MiFIR (Regulation 600/2014) adopted 15 May 2014 + published OJ 12 June 2014 + effective 3 January 2018 (delayed from 3 January 2017 by Directive 2016/1034 + Regulation 2016/1033). Replaced MiFID I 2007 (Directive 2004/39/EC). Foundational EU framework for investment services + trading venues + transparency + investor protection. Implementing measures include Commission Delegated Regulation (EU) 2017/565 (organisational requirements) + 2017/567 (MiFIR supplements) + Commission Delegated Directive (EU) 2017/593 (client funds + product governance + inducements) + 30+ ESMA RTS/ITS. Scope: investment firms (Article 4(1)(1)) + market operators + data reporting service providers + third-country firms. Authorisation Articles 5-10 + passporting Article 34 enabling cross-border services across EEA. ESMA (European Securities a

• MiFID II authorisation certificate from home NCA + scope of investment services and activities
• Passporting notifications to host NCAs under Article 34
• Third-country firm equivalence determination (where applicable Article 47)
• Cross-walk to MiFID II Review 2024-2025 implementations + Listing Act 2024 + FIDA Regulation 2024 readiness

• Authorisation scope not refreshed for new services
• Passporting notifications stale
• 2024 Review changes (RTS 27 abolition + PFOF ban + research unbundling reversal) gap analysis missing