MiFID II (Markets in Financial Instruments Directive II)
MiFID II is a comprehensive European Union regulatory framework that governs financial markets and improves protections for investors. Implemented in January 2018, it expanded upon the original MiFID I legislation by introducing stricter operational requirements, enhanced transparency rules, and more robust transaction reporting obligations.
Key objectives and regulatory scope
MiFID II aims to make financial markets more efficient, resilient, and transparent while strengthening investor protection. The regulation applies to:
- Investment firms
- Trading venues
- Data reporting service providers
- Third-country firms providing investment services
Market structure requirements
Trading venue classification
MiFID II formally defines three types of trading venues:
Trading obligations
The directive introduces mandatory trading obligations for:
- Shares admitted to trading on regulated markets
- Certain derivatives classes
- Standardized financial instruments
Next generation time-series database
QuestDB is an open-source time-series database optimized for market and heavy industry data. Built from scratch in Java and C++, it offers high-throughput ingestion and fast SQL queries with time-series extensions.
Transparency requirements
Pre-trade transparency
MiFID II mandates real-time publication of current bid and offer prices for:
- Market depth
- Trading interests
- Quote sizes
Post-trade transparency
Trading venues must report transaction details including:
- Price
- Volume
- Timestamp
- Venue identification
Transaction reporting and market data
Enhanced reporting requirements
The regulation significantly expands transaction reporting requirements:
- Increased number of reportable fields (65 fields)
- Broader scope of financial instruments
- More detailed client and trader identification
Market data provisions
MiFID II introduces:
- Consolidated tape requirements
- Standardized market data distribution
- Cost transparency for market data services
Best execution and trading controls
Best execution obligations
Investment firms must take all sufficient steps to achieve the best possible results for clients, considering:
- Price
- Cost
- Speed
- Likelihood of execution
- Size
- Nature of the trade
Trading controls and monitoring
The regulation requires:
- Algorithmic risk controls
- Real-time trade surveillance
- Testing requirements for algorithmic trading systems
Impact on time-series data management
MiFID II has significant implications for time-series data management:
-
Record keeping requirements
- 5-year minimum retention period
- Timestamp granularity requirements
- Order and transaction reconstruction capabilities
-
Data accuracy and precision
- Microsecond timestamp precision
- Clock synchronization requirements
- Data quality controls
Next generation time-series database
QuestDB is an open-source time-series database optimized for market and heavy industry data. Built from scratch in Java and C++, it offers high-throughput ingestion and fast SQL queries with time-series extensions.
Technology implications
Infrastructure requirements
MiFID II demands robust technological infrastructure for:
- Real-time monitoring
- Data storage and retrieval
- Reporting systems
- Time synchronization
System performance
Key technical considerations include:
- Low-latency processing capabilities
- High-throughput data handling
- Reliable timestamp mechanisms
- Scalable storage solutions
Relationship with other regulations
MiFID II operates alongside other key regulations:
- MiFIR (Markets in Financial Instruments Regulation)
- Market Abuse Regulation (MAR)
- EMIR (European Market Infrastructure Regulation)
This regulatory framework continues to evolve, with ongoing reviews and updates to address market developments and emerging challenges in financial markets.