What type of derivatives does MIFID specifically regulate?

MiFID, or the Markets in Financial Instruments Directive, specifically regulates financial instruments, including derivatives that are traded on regulated markets. This directive aims to enhance transparency, improve investor protection, and ensure fair competition in trading.

Commodity derivatives traded on regulated markets fall directly under MiFID’s scope, as they include contracts where the underlying asset is a commodity, and such contracts can be standardized and are subject to regulation. This regulation ensures that the trading of these instruments is conducted in a structured and transparent manner, thereby protecting investors and promoting market integrity.

In contrast, non-listed derivatives, real estate options, and forex forwards may not fall within the stringent regulatory frameworks established by MiFID in the same way that commodity derivatives do. Non-listed derivatives might be observed in OTC markets, which have different rules, while real estate options are not generally the focus of MiFID. Forex forwards, although potentially regulated under other frameworks such as EMIR (European Market Infrastructure Regulation), do not receive specific attention under MiFID in the same category as commodity derivatives traded on regulated markets.