At present, there is no harmonised third country regime under MiFID. Member States have discretion as to whether and how they allow third country firms (that is, non-EU firms) to access the EU market. MiFID II aims to create a more harmonised approach, by introducing two new options for third country firms.
Which option is most relevant for a firm depends on the firm’s client base:
- The branch model will allow third country firms to conduct regulated business with retail and elective professional clients through an EU branch. The branch will not have any passporting rights for business with retail and elective professional clients, which will mean that third country firms may have to establish a branch in each Member State where they wish to access retail markets. It remains a matter of Member State discretion for each EU state to decide whether to implement the branch model. If they do not wish to do so, Member States may continue to operate their existing national regime (which may or may not permit access and, if it does, may or may not require the establishment of a branch). Any retained national regime must not treat third country firms more favourably than firms from other Member States.
- The cross-border model will allow third country firms to conduct regulated business with per se professional clients and eligible counterparties on a cross-border basis from their home country. This is subject to registration with the European Securities and Markets Authority and a positive equivalence decision having been made by the European Commission in relation to the relevant third country.