Directive 2004/39 - Markets in financial instruments


Summary of Legislation

Markets in financial instruments (MiFID) and investment services


Directive 2004/39/EC on markets in financial instruments


It is designed to strengthen the European Union’s (EU) set of rules for investment services and regulated markets with a view to achieving 2 major objectives:

  • protecting investors and safeguarding market integrity by establishing harmonised requirements governing the activities of authorised intermediaries;
  • promoting fair, transparent, efficient and integrated financial markets.


Authorisation conditions and procedures

  • The directive requires EU countries to harmonise the rules governing investment services and activities. To that end, EU countries must set up an authorisation system enabling investment firms to operate throughout the EU. These firms must be registered and the register must be accessible to the public. Each authorisation is notified to the European Securities and Markets Authority (ESMA).
  • ESMA is able to develop draft regulatory technical standards. Furthermore, it assists the European Commission in its relations with non-EU countries and in assessing their markets.
  • In other words, the directive must allow investment firms, banks and stock exchanges to offer their services across borders on the basis of the authorisation issued by the competent authority of their home country. Since authorisation is subject to the same conditions in all EU countries, it promotes the harmonisation of rules governing investment firms.
  • In this context, the directive is intended to align national rules governing the provision of investment services and the operation of stock exchanges, with the ultimate aim of creating a single European ‘securities rule book’. It benefits investors, issuers and other market stakeholders by promoting efficient and competitive markets.

Prudential assessment

  • This directive also establishes the harmonisation of the assessment rules of procedure and criteria for the acquisition of a qualifying holding*. Its aims are to harmonise:
    • the notification thresholds for an envisaged acquisition or the disposal of a qualifying holding;
    • the assessment procedure; and
    • the list of assessment criteria.
  • In the context of an envisaged acquisition, the prudential assessment of the shareholders and of management fulfils detailed criteria and is conducted jointly by the competent authorities.
  • The directive states in particular that the competent authorities judge the appropriateness of the proposed acquirer and the financial soundness of the envisaged acquisition on the basis of:
    • the reputation and experience of those who direct the business of the insurance company following the envisaged acquisition;
    • the financial soundness of the proposed acquirer;
    • the existence of reasonable grounds to suspect an operation or attempt to launder money or finance terrorism.

Investor protection

  • The directive considerably enhances investor protection by setting conduct of business rules for providing investment services to clients and minimum standards for the mandate and powers that national competent authorities must have at their disposal. It also establishes effective mechanisms for real-time cooperation in investigating and prosecuting breaches of the rules.

Transparency and market integrity

  • The directive creates an obligation to safeguard market integrity, to report transactions and to keep records. ESMA has access to this information.
  • In particular, it establishes a pre-trade transparency obligation. This requires ‘internalisers’ (i.e. firms dealing on their own account by executing client orders outside regulated markets or multilateral trading facilities ) to disclose the prices at which they are willing to buy from and/or sell to their clients. However, it limits this disclosure obligation to transactions not above standard market size, defined as the average size of orders executed in the market.
  • This means that European wholesale broker-dealers are not subject to the pre-trade transparency rule and are not exposed to significant risks in their role as market-makers.
  • Each EU country is responsible for establishing a list of regulated markets and communicating this to the other EU countries and ESMA.

Operator protection

  • The directive includes a set of protective measures for ‘systematic internalisers’ when they are obliged to quote prices, so that they can provide this essential service to clients without running undesirable risks. These measures include the possibility of updating and withdrawing quoted prices.
  • The directive also establishes a fair market for retail investors. It prevents financial institutions from discriminating between such investors, e.g. by offering some of them improvements to publicly quoted prices.

Appointing competent authorities

  • EU countries must appoint their competent authorities and send the necessary information to the Commission, ESMA and the competent authorities of the other EU countries. The competent authorities act as a point of contact in the EU countries. ESMA keeps a list of these authorities up-to-date. These authorities are required to cooperate closely with ESMA.
  • EU countries and ESMA may conclude cooperation agreements concerning:
    • the supervision of credit institutions;
    • the procedures of liquidation and bankruptcy of firms;
    • the procedures for statutory audits of the accounts of investment firms;
    • the supervision of bodies involved in the procedures of liquidation and bankruptcy of investment firms;
    • the supervision of persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions.

Additional rules

  • The directive is designed to improve the EU rules on securities markets. It therefore sets out the general obligations which EU countries authorities must enforce.
  • Implementing measures, reports and reviews are adopted by the Commission following consultations with market participants from the EU countries and taking into account ESMA’s opinion.


Directive 2004/39/EC has been updated by Directive 2014/65/EU (‘MiFID II’), in an effort to incorporate the significant amendments made to the text over time.

Together with Regulation (EU) 600/2014, their delegated acts and delegated regulations, Directive 2014/65/EU will replace this directive as of 3 January 2018. (Directive 2014/65/EU was to have originally taken effect from 3 January 2017 but this date has been postponed by one year to 3 January 2018 by Directive (EU) 2016/1034).


It has applied since 30 April 2004. EU countries had to incorporate it into national law by 31 January 2007.


For more information, see:


Qualifying holding: any direct or indirect holding in an investment firm which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the investment firm in which that holding subsists.


Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145, 30.4.2004, pp. 1–44)

Successive amendments and corrections to Directive 2004/39/EC have been incorporated in the basic text. This consolidated version is for reference purpose only.


Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, pp. 349–496)

See consolidated version

Directive 2011/61/EU of 8 June 2011 of the European Parliament and of the Council on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, pp. 1–73)

See consolidated version

Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (OJ L 241, 2.9.2006, pp. 26–58)

Commission Regulation (EC) No 1287/2006 of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards record-keeping obligations for investment firms, transaction reporting, market transparency, admission of financial instruments to trading, and defined terms for the purposes of that Directive (OJ L 241, 2.9.2006, pp. 1-25)

last update 11.10.2016

This summary has been adopted from EUR-Lex.


Legislative text

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC