On October 27, 2016, the PRA published its final rules for
transposing passporting and algorithmic trading aspects of the
Markets in Financial Instruments legislative package, which
comprises MiFID and MiFIR, collectively known as MiFID II. The PRA
also published its responses to the feedback it received on its
proposed rules which were included in the consultation paper
published on March 24, 2016.
Under MiFID II, the scope of the passporting regime has been
extended to include the operation of an organized trading facility
(a new type of trading venue for non-equity instruments) and
emissions allowances. The PRA did not receive any responses to its
proposed rules on passporting although it has made some minor
amendments and added a definition of 'tied agent'. The
PRA's new rules will require firms that intend to extend their
passports to these additional activities or investment types to
notify the PRA. Existing passports will remain valid and unchanged.
The PRA will use the new EU notification forms developed by ESMA
and the current declaration for passport notifications under the
CRD will be extended to passport notifications made under MiFID II.
For firms that want to passport their MiFID activities under their
CRD passport, the PRA will continue using the EBA's forms.
MiFID II also introduces new rules on algorithmic trading. The
PRA is transposing the prudential requirements relating to
algorithmic trading in a new part of the PRA Rulebook on
Algorithmic Trading. Responses to the PRA's proposed rules
related to the scope of the rules, the record-keeping requirements
and the provision of direct electronic access. The PRA is not
amending the scope of its rules on algorithmic trading which will
apply to any relevant trading activity undertaken by regulated
firms on markets outside the EEA that would have been in scope of
the rules had it been located within the EEA. The PRA has decided
that it will not impose any record-keeping requirements on firms in
relation to their high frequency algorithmic trading activity
because it does not consider it necessary to have PRA rules as well
as corresponding FCA rules. The PRA is maintaining the requirement
for record-keeping in relation to testing a firm's systems.
However, the systems record-keeping obligations now require greater
detail as to the methodological aspects of tests performed and then
results and reactions to tests.
The implementation of the mandatory exchange of initial and variation margin for non-cleared OTC derivative trades in the EU commenced on 4 February for financial counterparties with the largest derivatives portfolios.
The latest report from our Centre for Regulatory Strategy, EMEA outlines the new requirements around the exchange and holding of collateral, and sets out the best practices and advanced techniques to respond effectively to the resulting collateral management challenge.
The Financial Conduct Authority FCA has published the interim feedback to the call for input to the post-implementation review of the FCA's crowdfunding rules (FS16/13) (the Interim Feedback Report)...
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