Markets in Financial Instruments Directive and Regulation: Entering into force on 15 May 2014, MiFID II is one of the most structuring regulations of recent years. The Directive aims to significantly strengthen investors protection by taking into account their preference in terms of sustainable finance and the organisation and integrity of markets, and to foster trading on trading venues. MiFID II provides end clients with greater transparency and requires each investment firm to take all the necessary steps with a view to achieving the best possible results on behalf of its clients. The Directive also requires investment firms to provide the necessary information to regulators so that they can identify any issues that could impact the interests of clients and ensure the proper functioning of markets.
MiFID II: background and objectives
The main areas covered by MiFID:
- Investor protection: the Directive harmonises rules on investor protection and aims to ensure the same protection for all clients regardless of the European bank providing the investment service.
- Competition: MiFID removes the monopoly of trading platforms, enables the use of several types of listings and imposes best execution by specifying the procedures to be respected by banks to obtain the best result for their clients. MiFID reflects market trends. Most transactions today are electronic and the number of trading venues has increased, with stock exchanges competing with electronic trading platforms and the proprietary trading activities of banks.
- MiFID addresses sustainable finance by integrating sustainability factors, risks and preferences into the organisational requirements and operating conditions applying to investment firms. This includes considering the sustainability preferences of clients (i) when identifying potential conflicts of interest, notably as part of the provision of investment services; (ii) but also when performing the suitability assessment of the provision of financial instrument or service when providing investment advice or portfolio management service.
MiFID II aims to provide clients with gradual and appropriate protection consistent with their category.
MiFID distinguishes between three types of clients:
- Non-professional clients: including local authorities, small and medium-sized enterprises, and natural persons.
- Professional clients: with the experience, knowledge and skills to make their own investment decisions and properly assess the risks incurred.
- Eligible counterparties (equivalents of Crédit Agricole CIB).
Depending on the type of investment service and the information it possesses on the client, Crédit Agricole CIB classifies the client as a retail client, a professional client or an eligible counterparty. A client is considered as an eligible counterparty where Crédit Agricole CIB provides eligible services only, i.e. order execution, dealing on own account and/or the reception and transmission of orders.
For more information on Crédit Agricole CIB’s client classification process under MiFID II, please refer to the “Client Categorisation” document adjacent.
Information on financial instruments and associated risks
When providing an investment service or ancillary service, investment service providers must provide their clients with information on the financial instruments and risks associated with these instruments prior to any transaction or operation involving a financial instrument. This information is adapted to the client’s category, experience and knowledge of the financial instrument, transaction or operation in question.
Crédit Agricole CIB asks its clients, and particularly those classified in the “Non-Professional Client” category, to read the information document on the nature and characteristics of the financial instruments and the associated risks.
The purpose of this document is to provide clients with summary information and general warnings on the risks associated with the different types of financial instruments, so that they are reasonably able to understand the nature and risks of the financial instruments offered and, consequently, make informed investment decisions.
The financial instruments listed in the document do not represent all the products offered by Crédit Agricole CIB but the catalogue of eligible products as defined by MiFID.
Ex-ante disclosure of costs and fees
The information on this page does not constitute a recommendation to buy or sell a financial instrument (hereinafter “the Product”). This information is intended for clients and potential clients (hereinafter “Clients” or “you”) who are considering a transaction with Crédit Agricole Corporate and Investment Bank (hereinafter “Crédit Agricole CIB” or “we/us”).
To improve transparency with its Clients, and in accordance with Article 24(4) of MiFID II (Directive 2014/65/EU on markets in financial instruments) and Article 50 of Delegated Regulation (EU) 2017/565 as amended by Quick Fix Directive 2021/338, Crédit Agricole CIB discloses to Clients before processing (ex-ante) a reasonable estimate of the costs and related charges to products and services in the following cases.
Firstly, the estimated costs and charges are made available to non-professional clients before each transaction (ex-ante) on a financial instrument. It should be noted that, where a non-professional client located in the European Economic Area plans to process a Product that is a Packaged Retail and Insurance-based Investment Product ( PRIIP), as specified by Regulation (EU) 1286/2014 (PRIIPs Regulation), the Key Information Document (KID) will contain the full disclosure of costs and charges.
In addition, where CACIB provides an investment advise service to professional clients or enters into a transaction on a financial instrument with eligible counterparties that will then distribute it to their end clients, the costs and charges are made available before each transaction (ex-ante) on a financial instrument.
For some non-complex products, in accordance with the regulations mentioned above, Crédit Agricole CIB provides information on costs and charges in the form of cost tables. These cost tables show the maximum level of fees that Crédit Agricole CIB may apply to individual transactions under normal market conditions, as updated where applicable.
The costs and charges relating to a specific transaction consist of the difference between the quoted price for the Product and its fair value, both of which are determined by Crédit Agricole CIB. The fair value of each product is based on observable market inputs, internal pricing model assumptions, and provisions and valuation adjustments; it represents the interbank transfer cost of such a product. Costs and charges are the component of the sale price above fair value. They represent the net banking income generated by Crédit Agricole CIB and are used to cover related costs, such as brokerage, distribution, listing and index licence fees.
For more information on costs and charges, please contact your usual Crédit Agricole CIB contact.
Order execution policy
Under MiFID, an investment service provider, when executing an order on behalf of a client relating to a financial instrument, is required to take all reasonable measures to obtain for its client the best execution of its order, in particular by implementing an “order execution policy”.
As part of improvement investor protection, MiFID II requires that all sufficient measures be taken to ensure to the client the best execution of its orders.
Regulatory Technical Standards (RTS)
Regulatory Technical standards (RTS) 27 :
Following the publication (on 16 February 2021) of Directive 2021/338 amending certain obligations of MiFID II, please note that Crédit Agricole Corporate and Investment Bank has decided to temporarily suspend the publication of its RTS 27 report (best execution report).
Regulatory Technical standards (RTS) 28 :