MiFID is designed to increase competition among exchanges, multilateral trading facilities (MTFs) and investment firms, giving them a "single passport" to operate throughout the EU on the basis of authorisation in their home member state. According to the Commission, investors will not only have access to a greater number of trading venues, but also a more robust and comprehensive framework ensuring high levels of investor protection.

"MiFID is a ground-breaking piece of legislation," commented Internal Market Commissioner Charlie McCreevy. "It will transform the landscape for the trading of securities and introduce much needed competition and efficiency. The cost of capital should go down over time, and this will have major benefits for the European economy. Last but not least, investors gain in terms of greater choice and stronger protection. I would like to thank the Committee of European Securities Regulators for their impressive contribution to this outcome."

However, only a handful of member states have met the EU's ambitious deadline for the implementation of MiFID into national law, among them the UK, Ireland, and Romania. The Commission has warned that this situation could in the short-term endanger the proper functioning of the MiFID passport, and have a significant impact on EU financial markets, as investment firms could have difficulties providing services in other member states, and could be uncertain as to which legal regime is applicable.

McCreevy warned: "I would like to urge those Member States who have not transposed to hurry up – such lack of action will damage their own firms."

The passport will enable authorised investment firms, banks and exchanges to provide their services freely across borders by harmonising national rules for investment services and the operation of exchanges. It is designed to benefit investors, issuers and market participants by promoting efficient and competitive markets, notably by allowing banks and other investment institutions to compete fairly with stock exchanges as trading venues in their own right, something which has until now not been possible in some Member States.

Despite the ambitious timetable, the Commission says that the vast majority of investment firms operating in the EU will be able to benefit from its freedoms as of 1 November. For those based or active in the member states where transposition of MiFID is still underway, transitional arrangements have been made by regulators to ensure that business based on the old Investment Services Directive passport can continue.

The body vested with the monitoring of firms covered by MiFID, the Committee of European Securities Regulators (CESR), has issued detailed guidance on this issue.