By Dominic Laurie
Europe business reporter, BBC News, Brussels
Mifid is short for the European Union's Markets in Financial Instruments Directive. It comes into force on 1 November.
EU investors can foresake the piggy bank in future
It sounds like one of those horrible, huge pieces of EU legislation that are impossible to understand.
However, it's important. Not only for any financial institution across the EU, but also for you and me.
From now on, it should be easier and cheaper for all of us to buy investments across the EU.
First, let's look at what this does for buying and selling shares. At the moment, doing this across EU borders isn't easy.
Take a company in the UK, for example. If it wants to sell some shares to a British expatriate living in France, they have to work by French rules.
That means maybe using French language forms and a jurisdiction they don't normally work in. The poor expat may not even speak the language!
The same goes for if that company wants to trade in Germany, Italy, Slovakia etc. Lots of languages, lots of jurisdictions, lots of hassle. Few companies at the moment probably bother with anything but the biggest overseas markets.
Here's another example. There are also restrictions that prevent international investment.
At the moment, if your stockbroker wants to buy a share in a Spanish company, the deal has to go through a Spanish broker.
With this directive, that all changes. Firms that sell us investments can now apply for a licence to operate anywhere across the 27 countries in the EU, plus also Norway, Iceland and Liechtenstein.
The EU hopes to cut trading costs at a stroke
And any business is done under the regulations of the home state of the firm.
That means not having to learn lots of different rules around Europe.
That will benefit UK firms in particular.
Since they'll be able to operate easily in English, that should be a massive opportunity for them, since English is fast becoming the lingua franca of much of the Union.
What will this mean for you and me? Cheaper investments, says Alan Jenkins, European head of Mifid at the consultants BearingPoint.
"There'll be more transparency, which tends to reduce margins. In the medium term, we'll see more transactions across borders," he says.
"So eventually business will become more competitive and fees reduced. The cost of capital for entrepreneurs will get cheaper, too."
More places to trade
Second, there will be more exchanges to buy and sell shares. The Mifid regulations propose that monopolies enjoyed by certain stock exchanges are removed.
At the moment, if you live in France and you are trading a French share, you have to do it on the Paris bourse.
Some EU countries, such as the UK and Germany, have already removed the monopoly, so this bit of the Mifid directive is already in effect.
For example, the London Stock Exchange used to be the only place you could trade in the UK.
But now there are now other exchanges that have sprung up where you can deal in some of the same shares as you can at the LSE.
Peter Randall is the director of Chi-X Europe, one of these new alternative trading platforms.
He says fees for share trading transactions are too high in the EU and need to come down.
"If you look at the EU, 35% to 46% of a broker's revenue goes on fees charged by stock exchanges and clearing," Mr Randall says.
"In Asia, this falls to 18% to 20%. In the US, it's even lower, at around 10% to 12% of brokers fees. The EU has a long way to go before it becomes competitive, but Mifid is a good start."
The logic goes that the more trading exchanges spring up around Europe, the more competition there will be, so prices for buying and selling will come down.
And it will be pension funds and private investors who benefit as much as anyone else.
But many companies have been concerned about the cost of implementing the new directive. They had to invest in new hardware and software, and also in staff training.
The UK's financial regulator, the Financial Services Authority, talked to a sample of firms to try to put a figure on that. They came up with a one-off cost to business of between £870m and £1bn, with ongoing costs of £100m a year.
But the FSA also reckoned Mifid would reduce compliance and transaction costs by up to £200m a year.
And that number did not include all the new business this directive could bring in.
The EU Commission which backed this directive says four EU countries will not be ready to implement the directive: Spain, Hungary, the Czech Republic and Poland.
The Commission is already taking legal action against them to bring them into line.
Until they do, it says both companies and individuals there will be missing out on better deals.