Term · Regulation & Capital-Market Communication
MiFID II
In briefMiFID II is the EU financial markets directive covering transparency, investor protection, and trading venues. Its research unbundling requires research to be paid for separately and has reduced coverage of many small and micro caps, impairing their visibility in the market.
Definition
MiFID II is the revised EU financial markets directive that regulates investment services, trading venues, and investor protection. Among other things, it introduced stricter transparency requirements, best-execution obligations, and the unbundling of research and trading costs (research unbundling). It is implemented through the national laws of the member states.
Why it matters for small caps
The separate payment for research required by MiFID II has thinned out analyst coverage of many small and micro caps. Less coverage means lower visibility and often thinner trading.
Common misreadings
- MiFID II is read merely as a consumer protection topic, even though research unbundling has noticeably reduced the visibility of small companies.
Frequently asked
What does research unbundling mean?
Research may no longer be paid for bundled with trading fees but must be billed separately. This has lowered demand for research on small stocks.
Why does MiFID II affect small caps in particular?
Because research on small, thinly traded stocks is less often economically worthwhile, their analyst coverage has declined markedly since the rule.
How is MiFID II applied?
As an EU directive, it is implemented through the national laws of the member states and overseen by the national supervisory authorities and ESMA.
Related terms
Sources
Primary
EUR-Lex, Richtlinie 2014/65/EU (MiFID II)
https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=CELEX:32014L0065
https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=CELEX:32014L0065
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.