The directive was originally due to be implemented in April 2007, having already been delayed by a year to give financial firms more time to adapt structures and procedures.

But in its November newsletter, the FSA confirmed press speculation that Britain - which currently holds the rotating presidency of the European Union - has called for the deadline to be extended for a further six months to 1 November 2007 in order to give firms more time to prepare for the legislation.

The FSA says it "welcomes this proposal as providing a rather more realistic timetable for firms to undertake the extensive preparatory work required".

The new directive will enable banks to offer financial products across all 25 EU member states. Banks across the EU will be able to trade shares internally, off an exchange, but will be required to publish the prices of intended trades to the rest of the market beforehand.

But research published by the MiFID Joint Working Group (JWG) last month (MiFID Readiness Survey) found that more than two-thirds of London-based investment firms do not have - or do not know if they have - a framework in place for complying with the directive.

The FSA is now releasing a "Planning for MiFID" guide and International Regulatory Outlook (IRO) document, which are designed to help firms highlights the key areas which will be affected by the directive and the likely main practical implications.

Hector Sants, FSA managing director for wholesale business, says: "The implementation of the directive is a major challenge, both for the FSA and for industry and, while November 2007 may seem a long way off, preparing to meet the challenge cannot begin soon enough."

The FSA, along with HM Treasury, will launch a consultation on the UK implementation of the directive when the final details are published during 2006. This will include an analysis of the cost and benefits of implementation for UK companies.