Regulations – securities trading

The MiFID II directive and MiFIR regulation apply when trading on securities markets in the EU.

What does it mean?

Common regulations for securities trading in Sweden and other EU countries has been introduced. The background to this is an EU directive – MiFID, Markets in Financial Instruments Directive – introduced on 1 November 2007. One consequence of MiFID is that it will be easier to trade securities across national borders.

Since January 2018, protection for securities investors is further enhanced with two new regulations which replace MiFID, namely MiFID II and MiFIR. The two sets of regulations result from a review of MiFID and aim to increase transparency on financial markets and also the level of investor protection.

The customer in focus 

The new MiFID II regulations have been introduced in the best interests of customers. Taking care of customers is nothing new for Handelsbanken, but the new regulations offer further protection. As a consequence, product information, costs and fees associated with transactions are clearer.

Requirements for identification codes

All companies and private individuals trading in securities require a global identification code. The identification code required by companies is called a Legal Entity Identifier (LEI), while that for private individuals is referred to as a National Client Identifier (NCI code).

An LEI is needed for all forms of securities trading and when transferring securities. An LEI or NCI code is also needed for taking part in different corporate actions with an existing holding (such as new issues). Trading exchange-traded funds (ETF) require an LEI or NCI code, but trading other mutual funds do not. Read more about LEIs and NCI codes by following the links below.

LEI
NCI code

Appropriateness test and target market

Part of the customer protection implemented by the regulations means that the Bank must always make sure that the product a customer trades is suitable for the customer and that the customer belongs to the product’s target market. For some time, the Bank has been using appropriateness tests to ensure that customers have knowledge and experience of products they intend to trade and are aware of their characteristics and risks. This process will be further developed to include more questions, to provide a more exact picture of the products that are suitable for a particular customer.

Appropriateness test (in Swedish only) Opens in a new window

Transparency

One of the objectives of MiFID II is that banks are to be more transparent for their customers. Customers will notice that they receive more information about the actual product and its associated costs and charges before a transaction is completed.

How this affects you:

  • Better overview of your costs.
  • Better overview of your investments.
  • Increased transparency and better protection for investors.