Kay Swinburne MEP, economics spokeswoman for the European Conservatives and Reformists group, warned that the review would find it difficult to keep up with the changing face of financial services, but said the proposals were nonetheless welcome.
"Regulation is always a step behind new technology and practices," Swinburne said.
"However, the MiFID review provides a timely opportunity to update the legislative framework to ensure continued confidence and competition in our markets."
The proposals, which were widely leaked and revealed by GFS News last week, were officially unveiled by Michel Barnier, European commissioner for the internal market and services on Wednesday.
Dubbed "MiFID II", the consultation document is billed as an opportunity to deal with new types of trading venues and products as well as technological developments such as high frequency trading.
Barnier insisted the "world has changed" since the directive was first introduced in 2007, saying that a revision would improve market transparency and efficiency and promote investor protection.
"We all know the current framework needs improvement," he said.
"My objective is to ensure that the revision of MiFID will lead to a stronger regulatory framework, adapted to the new trends and players on financial markets."
The consultation document puts forward new mandatory trading requirements for OTC derivatives and the application of pre and post-trade transparency to equities and non-equities as well as requirements on position reporting obligations for commodity derivatives.
Under suggested changes, the European Commission will have power to ban certain products and activities.
The new European Securities and Markets Authority will be able to ban the trading of certain financial instruments and have a supervision role in setting certain standards for high-frequency traders.
The industry has been given a deadline of 2 February to respond to the consultation document. A formal draft of the review proposals is set to be tabled next Spring.
Other measures in the document released on Wednesday include:
- High-frequency traders reaching a designated threshold to be required to seek investment firm authorization.
- All automated trading firms to introduce pass algorithms to regulators and put in place circuit breakers and stress-tests.
- For pre-trade transparency, waivers will be maintained although some adaptations will be applied.
- Real-time reporting of post-trade transactions reduced from three minutes to one minute.
- Bonds and structured products with a prospectus will be subject to pre-trade transparency requirements.
- Organised trading such as inter-dealer broker systems using voice or hybrid voice or electronic execution to be regulated under new definition of "organised trading facilities".
- Organised trading facilities that reach a certain asset threshold will be required to become a multilateral trading facility.
- Introduction of a mandatory EU consolidated tape across all financial instruments to improve transparency.