Mifid II: the new rules aimed at avoiding another crash
A major set of new rules governing European Union financial markets has now come into effect.
The Markets in Financial Instruments Directive II - Mifid II - means firms dealing in shares, bonds, commodities and derivatives must now report detailed information on trillions of euros in transactions.
The aim is to increase transparency and bolster investor protection to avoid some of the problems of the 2007-2009 financial crisis by allowing regulators to spot bubbles earlier.
Everyone who pays into, or draws a pension, will be affected by the changes, says Rebecca Healey of Liquidnet, because traders will have to be able to justify investment decisions to investors.
"It's making everyone in the investment chain accountable for what they do," she says.
Will Mifid II affect the UK after Brexit?
Neil Robson, a partner at law firm Katten Muchin Rosenman, says the UK watchdog, the Financial Conduct Authority has been at the forefront of implementing the new rules.
He says the government is unlikely to ditch Mifid II or relax the rules after Brexit because they provide added reassurance to international traders about the City of London.
Rebecca Healey said that US traders had been under pressure from clients to give the same level of transparency required by Mifid II.
Under the new rules, traders will have to "unbundle" business practices.
There will have to be a clear audit trail of investment decisions, allowing investors to see whether they are getting value for money, she says.
Will stock markets be more transparent?
That's the idea at least. So-called "dark pools", or private markets, are supposed to be used by institutional investors for trading large blocks of shares without distorting the market.
However, their lack of transparency can make dark pools vulnerable to conflicts of interest and predatory trading by more unscrupulous forum members.
The new rules seek to make sure dark pools revert to being used by institutional investors, Ms Healey says.
Neil Robson says the new rules mean there is significantly more data per transaction, which allows regulators to monitor who is doing what in real time: "They'll be able to spot trends. They'll be able to use this technology to see exactly what is happening on the markets."
He says Mifid needs updating to catch up with the changes in technology and the speed of trading that was simply not possible a decade ago.
Will firms have to pay more for research?
As part of the "unbundling" of services, financial services firms will have to pay separately for research and brokerage services.
George Godber, fund manager at Polar Capital, says it has created a "vast change" in the way he works.
"We have to rate every single transaction through software that we have with every provider of research," he says.
"If I have a 90-second phone call, I have to rank (log) that almost as a lawyer does and pay for it."
Although he believes it will improve value for money, it has also increased the cost of serving consumers.
Some aspects of the legislation are vague and open to interpretation, according to Mr Godber.
Will the changes work?
Regulators are keen to point out that this is "a journey, and not a one-off event".
And like any journey, the going may occasionally get bumpy, says Ms Healey: "This level of behavioural change isn't going to happen overnight - there will be teething problems."
To that end, regulators in the UK and Germany on Wednesday gave three clearing houses an exemption until July 2020 from opening themselves up to more competition.