• MiFID II and MiFIR
  • PRIIPs
  • Asset Management
  • FX Global Code of Conduct

MiFID II FX / MiFID II FX Requirements and Details

The European Commission’s regulatory framework for financial markets is detailed in the The Markets in Financial Instruments Directive II (“MiFID II”) and the accompanying Markets in Financial Instruments Regulation (“MiFIR”) legislation. MiFID II represents a major overhaul of the existing law, building on and extending the scope of the first Markets in Financial Instruments Directive, which originally came into force in November 2007. MiFID II introduces stringent requirements relating to communication, disclosure, and transparency in favor of investors in all asset classes including the FX Market.

A key objective of MiFID II is ensuring firms provide the best execution for their clients of all asset classes, including FX Best Execution. Best execution has several aims, including:

“to ensure that investment firms execute client orders on terms that are most favorable to the client” (MiFID II Recital 91);

to sustain the integrity with price transparency & execution quality; and to promote competition among trading venues in increasingly fragmented markets.

FX Best execution obligations apply to firms when they are executing currency orders on behalf of their clients, which will generally be the case when a firm owes contractual or agency obligations to a client (MiFID II Recital 33) or the client legitimately relies on the firm to protect their interests in relation to the execution of the transaction (FCA Thematic Review). Furthermore, best execution requirements invite participants from all sides to evaluate and minimize currency costs.

Below is a resource center for learning more about MiFID II, MiFIR and ESMA:

Regulatory technical and implementing standards – Annex I (Draft) (28 September 2015): https://www.esma.europa.eu/sites/default/files/library/2015/11/2015-esma-1464_annex_i_-_draft_rts_and_its_on_mifid_ii_and_mifir.pdf

Commission Delegated Directive (EU) 2017/593 (7 April 2016) -Details on safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits (OJ L 87, 31.3.2017, p. 500–517): https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=uriserv:OJ.L_.2017.087.01.0500.01.ENG

Commission Delegated Regulation (EU) 2017/567 (18 May 2016) -Definitions, price and fee transparency, portfolio compression, and supervisory measures: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R0567&from=ES

Commission Delegated Regulation 2017/565 (31 March 2017) -Organizational requirements and defining spot and derivative contracts relating to currencies: https://ec.europa.eu/transparency/regdoc/rep/3/2016/EN/3-2016-2398-EN-F1-1.PDF

Commission Delegated Regulation (EU) 2017/576 of 8 June 2016 -Supplementing Directive 2014/65/EU of the European Parliament and of the Council (31 March 2017) -Definition of quality of execution (RTS 28 – Top Five Execution Venues): https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32017R0576

Commission Delegated Regulation 2017/583 (31 March 2017) -Regulatory technical standards on transparency requirements and included assets: https://eur-lex.europa.eu/eli/reg_del/2017/583/oj

Commission Delegated Regulation 2017/585 (31 March 2017) on data standards and formats for financial instrument reference data supplementing MiFIR: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R0585&from=EN

ESMA has developed various Question and Answer (Q&A) documents in support of MiFID/MiFIR: reference.

ESMA Q&A on Investor Protection under MiFID II (18 December 2017)
ESMA Q&A on  MiFID II and MiFIR market structures topics (15 November 2017)
ESMA Q&A on MiFID II and MiFIR transparency topics (15 November 2017)
ESMA Q&A on MiFIR data reporting (14 November 2017)
ESMA Q&A 0n MiFID II and MiFIR commodity derivatives topics (14 November 2017)

PRIIPs (packaged retail and insurance-based investment products) Regulatory impact on FX

The European Union’s (EU) PRIIPs Regulation requires financial services companies to provide a Key Information Document (KID) that clearly describes the product features, costs, and risks to retail investors.  The FCA has noted that the PRIIPs Regulation will form part of the body of EU legislation that is converted into UK law.  The FX best execution analytics provided by FX Transparency can help firms meet their FX Compliance obligations, by providing FX Transaction Cost Analysis (FX TCA) which will calculate FX costs and fees to be reported.

Below is a resource center for learning more about PRIIPs:

FCA’s disclosure rules following application of PRIIPs Regulation: https://www.fca.org.uk/publication/policy/ps17-06.pdf

May 2 2017

PRIIPS Regulation: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R1286&from=EN

Nov 26 2014

PRIIPS Regulatory Technical Standards (RTS): https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1492595272058&uri=CELEX:32017R0653

Mar 08 2017

Asset Management

In 2017 the FCA released its Asset Management Market Study Final Report (https://www.fca.org.uk/publication/market-studies/ms15-2-3.pdf) which found that with regards to execution costs, “most firms did not have adequate management focus, front-office business practices or supporting controls to meet our current requirements on best execution”. The suggested remedies will increase the transparency of costs, with aggregated and on-going information on all costs, including FX fees. Firms will be required to do regular reporting the itemize the breakdown of costs. The FCA noted that there is also an expectation that these requirements will increase firms’ monitoring of their own execution quality.

Both PRIIPs and MiFID II also require firms to calculate and disclose indirect costs such as FX transaction costs. Under MiFID II there will be greater obligations around best FX execution for asset managers. The new, more comprehensive best execution provisions in MiFID II will also strengthen the content and quality of disclosure to clients. Asset managers will be expected to step up their efforts FX analytics to show that they obtain the best rate for their clients. This FX analysis will provide greater transparency on FX execution quality and currency costs.

Below is a resource center for learning more about the FCA Asset Management Study & Regulatory stance

FCA’s Asset Management Market Study Final Report (MS 15/2.3): https://www.fca.org.uk/publication/market-studies/ms15-2-3.pdf

FCA publishes final report into the asset management sector: https://www.fca.org.uk/news/press-releases/fca-publishes-final-report-asset-management-sector

Investment Managers still failing to ensure effective oversight of best execution: https://www.fca.org.uk/news/news-stories/investment-managers-still-failing-ensure-effective-oversight-best-execution

FX Global Code of Conduct

The Global Code of Conduct (“Code”) was developed by the Foreign Exchange Working Group (“FXWG”) to provides the FX market with a set of principles for good practice. The Code was also created in partnership with a diverse Market Participants Group (MPG) from the private sector.  A Global Foreign Exchange Committee, formed of public and private sector representatives, including central banks, will promote and maintain the principles.

Core to the Code is defining a benchmark for market participants on ethics, transparency, governance, information sharing, electronic trading, algorithmic trading, and prime brokerage.  FX Transparency’s FX TCA reporting was designed to help support adherents to the Global Code and specifically aids compliance including the following:

  1. Fair Mark-Up

The Code addresses mark-ups stating, “prices charged to clients are fair and reasonable considering applicable market conditions …”. Also stating firms should have in place “processes to monitor whether their Mark Up practices are consistent with their policies and procedures”. Our foreign exchange analysis would allow The Code adopters to evaluate the fairness of prices proposed or charged to clients by comparing them against an independent, objective third party provider.

  1. Algorithmic Trading

The FX Global Code addresses best practices for market participants providing algorithmic trading or aggregation services to clients, requiring sufficient disclosure to enable the client to evaluate the performance of the service. Our FX TCA reporting provides performance metrics, including, inter alia, price, benchmark performance (across an array of benchmarks including Interval TWAP), spread costs, market impact, post-trade revaluations, signaling risk, speed, and implementation shortfall on both parent and child orders.

Below is a resource center for learning more about The FX Global Code:

Bank for International Settlements

GFXC Request for Feedback on Last Look practices in the FX Market: Results and Recommendations
Dec 2017

GFXC Last Look Consultation responses
Nov 2017

Update from 14 November GFXC meeting
Nov 2017

FX Global Code published
May 25, 2017

Guy Debelle (Deputy Governor RBA) update on FX Global Code of Conduct
Mar 2017

Global Code of Conduct for the Foreign Exchange Market
May 2016

FX Global Code: Public Update on Adherence
May 2016


Financial Stability Board (FSB)
Bank of England

Financial Conduct Authority (FCA)