The Markets in Financial Instruments Directive (MiFID) has essentially been seen as a compliance and IT exercise for financial services firms. As a result, much of the analysis surrounding MiFID compliance and the development of business strategies for the new regulatory landscape has focused on upgrading internal procedures and building the supporting IT infrastructure.

The impact of MiFID extends far beyond mere compliance and IT alone, however. The unprecedented scope of harmonization of securities markets legislation and the resulting open architecture ushered in by MiFID, especially in trade execution and reporting, will cause a profound upheaval within existing market structures.

MiFID is nothing short of a revolution: it will see banks operating as exchanges for some activities, exchanges offering alternative execution services that more closely resemble the structure of OTC markets than traditional organized markets, and the decentralization of order execution among a panoply of venues in markets previously governed by concentration rules: le monde à l'envers. MiFID has a profound impact on the organization, day-to-day operations and business strategies not only of investment firms – which have tended to be the focus thus far – but also of exchanges, asset managers and other financial markets intermediaries, such as brokers, data consolidators and business solutions providers. Overall market design and functioning are likely to be heavily impacted, not least because the implementation of MiFID is not a static event necessitating only one-off sunk costs; rather, it requires firms to make constant dynamic readjustments to remain competitive.