MiFID II has impact on Asian institutions and asset managers

ASIAN financial institutions and asset managers may heave a sigh of relief that they are seemingly unaffected by Europe's wide-ranging set of capital markets directives, called the Market in Financial Instruments Directive (MiFID II).

The legislation - which came into effect last year - was about seven years in the making, and is expected to transform the dealing and processing of financial instruments and the distribution of products such as funds. But that sense of relief among Asian institutions has probably come too soon. There are a number of ways in which Asian institutions may be forced to comply, particularly if they have European counterparties or EU subsidiaries providing portfolio services to retail and professional clients. Ultimately in the quest to establish a baseline of "best execution" or best practice, MiFID II may well set a global standard.

The first version of MiFID went into effect in 2007, but the global financial crisis quickly exposed its shortcomings. MiFID II aims to enhance investor protection and inject yet more transparency into parts of the financial markets seen as opaque, such as derivatives. There are broad implications for EU market participants and for Asian institutions that seek EU business.