Markets in Financial Instruments Directive – MiFID

Securities are the instruments through which funds move through the financial mediation system underpinning the economic function of financial markets. The two basic forms of securities are: equity and debt. Even these fundamental instruments may display sophisticated characteristics, for example, convertible debt, preferred stock, and classes of equity; the mathematics needed to assess risk, return, and yield, even on these “simple instruments,” are beyond the knowledge of most retail investors. Rudimentary derivative instruments, such as options and futures, representing the tip of the iceberg within the critical area of derivative instruments, rest squarely with the professional to understand and use properly to optimise a portfolio of assets. MiFID applies to the myriad instruments traded in the financial markets as set forth in Section C of Annex 1 of the Directive.

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