MiFID II Compliance in 2026: What's Changed and What's Coming

MiFID II has been the backbone of EU securities regulation since January 2018. But the framework that investment firms implemented eight years ago is no longer the framework they need to comply with. Between the MiFIR review (finalised in early 2025), ESMA's evolving Level 2 and Level 3 guidance, and national supervisory authorities' increasing focus on conduct obligations, MiFID II compliance in 2026 requires a thorough review of existing arrangements.

This guide covers the material changes that affect investment firm compliance — not the academic overview, but the specific amendments and supervisory expectations that drive operational change.

MiFID II / MiFIR: A Quick Primer

For compliance teams new to the framework, MiFID II operates through two legislative instruments:

• MiFID II (Directive): Sets out the authorisation, governance, organisational, and conduct requirements for investment firms and trading venues. Transposed into national law by each EU Member State.
• MiFIR (Regulation): Directly applicable across the EU without national transposition. Covers transparency requirements, transaction reporting, and trading obligations.

Together, they regulate investment services (reception/transmission of orders, execution, portfolio management, investment advice), trading venues (regulated markets, MTFs, OTFs), and market data. The framework applies to any firm authorised to provide investment services in the EU — banks with investment firm authorisations, standalone investment firms, wealth managers, and market operators.

Key 2024–2026 Amendments

The Consolidated Tape Provider (CTP)

The single most significant structural change in the MiFIR review is the introduction of a consolidated tape for equities. ESMA was mandated to select a CTP through a competitive tender process, with the provider expected to be operational by late 2026.

What this means in practice:

• Pre- and post-trade data consolidation: The CTP will aggregate real-time trade data from all EU trading venues and systematic internalisers into a single, authoritative feed
• Revenue sharing: Trading venues contributing data will receive a share of the CTP's revenue, reducing their incentive to restrict data access
• Data quality standards: The CTP must publish data with latency of no more than 1 second for post-trade data, using standardised formats
• Impact on best execution: With a consolidated tape providing comprehensive price data, investment firms' best execution obligations become more verifiable — and supervisory scrutiny of execution quality will intensify

Payment for Order Flow (PFOF) Ban

The revised MiFIR introduces an EU-wide ban on payment for order flow, effective from 2026. Under PFOF, brokers route client orders to specific market makers in exchange for payments — a practice that creates a conflict between the broker's financial incentive and the client's right to best execution. The ban applies to all investment firms executing or transmitting client orders in financial instruments.

Firms that currently receive PFOF revenue must restructure their business models. The ban does not extend to legitimate commission-sharing arrangements where the payment reflects genuine execution quality improvements, but the burden of proof sits with the firm.

Research Unbundling: Relaxation for SME Research

MiFID II's original research unbundling rules required investment firms to pay for third-party research separately from execution commissions — ending the historic practice of bundled brokerage. The 2024 amendments introduce a significant relaxation: investment firms may once again bundle research costs with execution commissions for research covering issuers with a market capitalisation below €10 billion.

The rationale is clear: unbundling dramatically reduced the production of equity research on small and mid-cap companies, as the economics of selling research on a standalone basis don't work for smaller issuers. The relaxation aims to restore research coverage for SME issuers, though firms must still:

• Disclose to clients the total cost of execution and research
• Maintain a research budget and assessment process for the quality of research received
• Ensure the arrangement does not compromise best execution

For large-cap research, full unbundling remains in force. Compliance teams need to implement a dual approach — unbundled for large-cap, optionally bundled for sub-€10bn issuers.

Revised Transparency Requirements

The MiFIR review adjusts the pre-trade and post-trade transparency regime:

• Equity transparency: Simplified waiver regime — the reference price waiver and the negotiated trade waiver are retained, but the large-in-scale waiver thresholds are recalibrated. The double volume cap (DVC) mechanism is removed and replaced with a single cap on dark trading, set at 7% of total EU trading volume per instrument.
• Bond transparency: Extended pre-trade transparency for bonds traded on trading venues, with adjusted deferral arrangements for large trades. The aim is to improve bond market transparency without destroying liquidity for less liquid instruments.
• Systematic internaliser regime: Clarified obligations for SIs, including enhanced quote obligations and a prohibition on matching client orders at midpoint of the primary market's bid-ask spread without price improvement.

Best Execution: What ESMA Expects in 2026

Best execution (Article 27 MiFID II) remains one of ESMA's top supervisory priorities. The 2026 expectations are significantly more demanding than the original 2018 implementation:

Execution Quality Analysis

Investment firms must demonstrate — not just state — that they achieve best execution for clients. This requires systematic analysis of execution quality across venues, including price, cost, speed, likelihood of execution, and settlement. ESMA expects firms to compare their execution prices against the consolidated tape data (once available) and explain any systematic deviations.

Venue Selection

The best execution policy must include specific criteria for selecting execution venues and review those selections at least annually. Simply defaulting to a single venue (or a home exchange) without documented analysis of alternatives will not satisfy supervisory expectations. For multi-venue firms, order routing logic should be documented and tested.

RTS 28 Reporting

Investment firms must publish annual reports on their top five execution venues by trading volume for each class of financial instrument (RTS 28 reports). ESMA has noted that the quality of these reports is often poor — generic disclosures that don't provide meaningful information to clients. 2026 supervisory reviews will focus on the substance and specificity of RTS 28 disclosures.

Suitability Assessment

For firms providing investment advice or portfolio management, suitability assessment requirements have evolved significantly:

Sustainability Preferences

Since August 2022, firms must assess clients' sustainability preferences as part of the suitability assessment. In 2026, this means asking clients about their preferences regarding Taxonomy-aligned investments, SFDR Article 8/9 products, and principal adverse impact (PAI) considerations. ESMA's 2026 review found that many firms' sustainability questionnaires are too complex or leading, and that sustainability preferences often aren't effectively matched to available product characteristics.

Digital Suitability

For robo-advisors and hybrid advisory models, ESMA's guidelines on suitability in the digital age (2025) set expectations for algorithmic assessment quality, client profiling methodology, and disclosure requirements. Digital suitability tools must demonstrate that their questionnaires capture the same information depth as face-to-face assessments, and that algorithm-driven recommendations consider the full range of suitability factors.

Product Governance

MiFID II's product governance requirements (Articles 16(3) and 24(2)) require manufacturers and distributors of financial instruments to define target markets and conduct regular product reviews. In 2026, the focus has shifted to:

• Negative target market: Firms must define not just who the product is for, but who it is explicitly not suitable for. ESMA expects specific negative target market definitions, not generic exclusions.
• Product review frequency: Annual product reviews are minimum — firms must conduct ad hoc reviews when material events affect a product's risk/return profile or when distribution patterns deviate from the intended target market.
• Cost and charges transparency: The interaction between product governance and cost disclosure requirements means firms must assess whether total costs (including distribution costs) are consistent with the product's intended target market's ability to benefit from the investment.
• Crypto-asset products: Investment firms distributing exchange-traded products with crypto-asset exposure must apply MiFID II product governance requirements, including MiCA considerations for underlying crypto-asset risk assessment.

Transaction Reporting (MiFIR Article 26)

Transaction reporting obligations continue to be a major compliance burden and a frequent source of regulatory findings. Key 2026 developments:

• Reporting quality: ESMA's FIRDS (Financial Instruments Reference Data System) data quality checks have become more sophisticated. Firms submitting reports with systematic errors face investigation and potential sanctions.
• Crypto-assets: Financial instruments with crypto-asset underliers are reportable under MiFIR. The interaction between MiFIR transaction reporting and ESMA's broader regulatory reporting framework requires careful mapping of reporting obligations.
• National reporting regimes: Some national regulators (notably the FCA post-Brexit) have diverged from MiFIR reporting requirements. Multi-jurisdiction firms must maintain parallel reporting capabilities.

2026 MiFID II Compliance Checklist

For investment firm compliance teams, here is a priority-ordered checklist for 2026:

1. PFOF assessment: If your firm receives payment for order flow, assess the timeline for cessation and model any revenue impact. Develop alternative revenue structures.
2. Best execution review: Update your best execution policy to reflect the consolidated tape (once operational), re-evaluate venue selection methodology, and prepare for enhanced RTS 28 reporting.
3. Research arrangements: If your firm pays for research, review whether the SME research bundling relaxation offers operational or cost benefits. Update your research budget and assessment processes accordingly.
4. Suitability framework update: Review sustainability preference questionnaires against ESMA's latest guidance. Ensure digital advisory tools meet the enhanced standards for algorithmic suitability.
5. Product governance review: Refresh target market definitions, especially negative target markets. Conduct ad hoc reviews for any products materially affected by market or regulatory changes since the last review.
6. Transparency compliance: Assess the impact of revised pre-trade and post-trade transparency obligations, especially the new dark trading cap and adjusted bond transparency requirements.
7. Transaction reporting audit: Commission or conduct an internal audit of transaction reporting data quality. Fix systematic errors before ESMA's enhanced quality checks identify them.
8. Staff training: Update MiFID II compliance training to cover 2024–2026 amendments, particularly for client-facing staff (suitability, best execution, product governance changes).

"MiFID II compliance in 2026 is not about re-implementing the directive. It's about recognising that the framework has evolved significantly — and your compliance arrangements need to evolve with it. Firms running 2018-vintage MiFID II programmes will face supervisory findings."

Looking Ahead: The MiFID III Discussion

While not yet formalised, the European Commission has signalled a broader review of the MiFID framework — informally termed "MiFID III" — to be proposed in late 2026 or 2027. Expected themes include simplification of reporting requirements, enhanced retail investor protection (building on the Retail Investment Strategy), further digitalisation of investment services, and integration with the Capital Markets Union agenda.

For compliance teams, the key takeaway is that MiFID II is a living framework requiring continuous monitoring. RegPulse tracks ESMA consultations, delegated acts, national regulator guidance, and industry body publications related to MiFID II implementation. For related frameworks, see our guides on ESMA regulatory reporting, DORA compliance (which intersects with MiFID II operational requirements), and the RegTech vendor selection guide for automating MiFID II compliance monitoring.