The FCA is also considering simplifying post-trade and pretrade transparency threshold calculations and application to allow for flexibility and alignment with other jurisdictions. Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is intended to be a referral service for attorneys and/or other professionals.

  • Further information on the SFDR can be found in our SFDR Update on Action Points for Non-EU Fund Managers.
  • On 12 April 2021, the FCA will be launching its online invoicing portal for firms to access their invoices and arrange for payment of their fees.
  • The FCA expects firms and other regulated persons to be able to demonstrate they are taking all reasonable steps during the first quarter of 2021 to ensure compliance with the UK DTO.
  • Under DTR 5, notifications of positions in UK-listed shares must be reported at 3% and each 1% thereafter.
  • For more details on these reviews and how they impact the UK market vs EU please see the divergence tracker below.
  • Investment firms may continue to trade shares on EU venues until 2Q22, preserving their ability to seek best execution, as a result of the FCA’s temporary transitional decision.

However, this has left the industry with little time to implement the changes, especially in relation to the requirement to make electronic communication the default mode of communication with wholesale clients. We understand that HM Treasury and the FCA did not expect the move to electronic communication to be contentious. For firms operating in the EU and UK, regulatory planning has become more difficult with divergence across new and changes to existing regulation, the review of MiFID II being a prime example. While the UK on-shored MiFID II as result of Brexit and starts from a position of a harmonised rulebook, it is becoming clear that the UK will consider to what extent the proposals made by the EU will be adopted by the UK. The UK is now also making its own amendments to requirements the EU has not sought to change.

New Fca Measures To Aid Uk

Therefore, the market has been hoping for an arrangement to emerge that will minimise disruption come 1 January 2021 and maintain access to trading venues in both the UK and the EU for all firms, regardless of the jurisdiction in which they are authorised. Recognising the vital role of capital markets in mitigating the effects of COVID-19, on April 8, 2020, the UK’s Financial Conduct Authority announced additional primary market measures intended to aid companies listed on a UK-regulated market or SME Growth Market during this turbulent time. These measures are intended to help listed companies seeking to raise new funding to increase their liquidity while ensuring that they retain sufficient investor protection. The measures apply with immediate effect and are intended to be temporary interventions, but as the situation is still evolving, their duration remains open-ended. RTS 28 requires executing firms to publish an annual report listing the top five execution venues where they have sent client orders in the preceding year, and a summary of the execution outcomes they have achieved, broken down by venue and class of instrument. Firms who carry out portfolio management or reception and transmission of orders are required by the UK MiFID delegated regulation to produce reports equivalent to RTS 28. Following the on-shoring of EU legislation post-Brexit, UK MiFID is now spread across primary and secondary legislation, the FCA’s Handbook and regulatory technical standards.

fca update on share trading obligations

The Review also consults on extending electronic communications as the default for investor reporting to retail clients and also make wider changes to the transparency regime aiming to simplify the current requirements, increase the UK’s competitiveness and deliver better outcomes for consumers. The DTO, which is set out in Article 28 of the UK Markets in Financial Instruments Regulation , requires financial and certain non-financial counterparties to conclude transactions in standardised and liquid over-the-counter derivatives only on regulated trading venues. cryptocurrency bitcoin Article 32 of UK MiFIR specifies that derivatives that are subject to the DTO must be subject to the derivatives clearing obligation under UK EMIR, admitted to trading on at least one regulated trading venue and be sufficiently liquid to trade only on those venues. The FCA refers to HM Treasury’s wholesale markets review consultation which includes proposals on reforming the Markets in Financial Instruments Directive commodity derivatives position limits regime to limit the scope of the position limits to agricultural contracts and physically settled contracts.

The UK FPC has stated that it remains committed to the implementation of robust prudential standards, maintaining a level of resilience that is at least as great as that currently planned, which would exceed that required by international standards. However, the Bitcoin UK will work to its own timeline, as shown by the recent decision to extend the implementation date for Fundamental Review of the Trading Book Standardised Approach reporting by UK banks to January 2022, rather than imposing the EU deadline of September 2021.

The case demonstrates the FCA’s continued focus on nonfinancial misconduct in light of its announcement in November 2020 that it had banned three individuals on account of convictions for sexual offences. Similarly, each individual was found to not be “fit and proper” and prohibited from working in the financial services. On 24 March 2021, the FCA announced a campaign to encourage individuals working in financial services to report potential wrongdoing. To support this campaign, the FCA has developed a new web page where a digital toolkit for industry bodies, consumer groups, and whistleblowing groups can be found. The speech sets out various key market abuse cases brought against individuals and firms, which includes proceedings relating to public censure, market abuse, insider dealing, and failure to meet notification and disclosure requirements. Most notably, Steward underlined the success and complexity of the insider dealing case against Fabiana Abdel-Malek and Walid Choucair, the latter of whom was sentenced to three years of imprisonment and an order to pay £3.9 million.

Why Is The Fca Proposing Changes?

This new system introduces faster validation and automated alerts to help identify delayed notifications or other issues. While the FCA saw an overall increase in transactions in 2020, there was a reduction in STORs during this period. The FCA notes that its surveillance and investigation work has reduced trading by certain actors whose trading prompted high numbers of STORs. The FCA’s intention is to allow consumers and professionals to check the details of key individuals working in financial services, and it has provided additional information and FAQs on this topic. The MoU will establish the Joint UK-EU Financial Regulatory Forum to facilitate dialogue on financial services issues. Trade associations have asked for an extension of the temporary equivalence decision for UK CCPs. For additional coverage on financial and regulatory news, visitBridging the Week, authored by Katten’sGary DeWaal.

fca update on share trading obligations

The aim was specific requirements of MiFIR/MiFID II, to streamline regulatory requirements whilst allowing for more flexibility for wholesale clients. In the fca update on share trading obligations statement the FCA states that mutual equivalence between the UK and the EU should be easy to agree and remains the best way of dealing with overlapping STOs.

Dealerweb: Wholesale Market

A UK AIFM is treated as a third country AIFM by the EU member states and, consequently, may only market an EU AIF in the EU under the national private placement regime of Article 42 AIFMD, where available. Overall, ESMA’s proposals differ to the UK proposals as contained in the Wholesale Markets Review in a number of areas and will create further divergence if implemented as proposed. This differs from the UK approach as theUK government has recently announced that it intends to abolish the UK STO applicable to UK shares. Best executionThe EC’s MiFID II ‘Quick Fix’ Directive, published Bitcoin in February 2021, included the suspension of the obligation to produce best-execution under RTS27 . In addition, in April 2021, ESMA also decided to temporarily suspend these reports until the Quick Fix Directive comes into force on 28 February 2021. The inclusion of three additional data elements with a view to harmonise the way they are reported and avoid inconsistent and duplicative reporting of the same information at the national level. Transaction ReportingIn March 2021, ESMA published its Final Report with proposed changes to the MIFIR Transaction Reporting Regime.

fca update on share trading obligations

An understanding of the local interpretation of the MiFID rules, such as whether marketing is considered to constitute a MiFID investment service or activity, or restrictions on the use of tied agents, is essential, as the regulatory perimeter is not identical across the EU. The rules applicable to a UK AIFM with respect to its activities of managing a non-EU AIF do not change. Areas where HM Treasury has taken an equivalence decision in relation to European Economic Area jurisdictions, in the area affected by such decision. The Main Directions include Annexes and explanatory guidance16 on how the Brexit Statutory Instruments and technical standards, which onshored EU law, and the updated FCA Handbook should be read. Permissibility of the provision of cross-border investment services activity and delegation arrangements by, or to, UK firms must be confirmed on a case-by-case basis for each EU jurisdiction. The UK’s approach goes further than the ‘Quick Fix’ amendment to solely remove the RTS 27 obligation for venues, which means this will be an area of rule divergence between the EU and UK going forward. For UK firms, the FCA’s temporary measures have given some immediate relief, while EU firms will have to continue to produce the 10% depreciation notifications until the Quick Fix is implemented by Member States by 28 February 2022.

Associations Welcome Uk Wholesale Markets Review

From a UK perspective, in February 2021, the FCA published a Review, which looked at how a sample of asset management firms have implemented MiFID II’s product governance regime when manufacturing products and how far they consider the interests of end clients through the product lifecycle. It is clear that this will remain a high focus area and the FCA will consider if any changes to PROD rules will be required for distributors on the back of this report. PFOF is the practice of brokers receiving payments from third parties for directing client order flow to them as execution venues.

fca update on share trading obligations

Issuers and other market participants should consult with their legal advisers on updating their internal policies and guidance to reflect both the UK MAR and EU MAR regimes, and internal compliance processes should be reviewed regularly and, if necessary, updated to reflect any changes to either market abuse regime. The City of London’s unfettered access to the European Union, its biggest customer, ends when Brexit transition arrangements expire at 2300 GMT, and without the change of heart UK and EU market participants would have been unable to trade swaps with each other when markets reopen on Jan. 4. By end-March, Europe’s largest exchange Cboe saw about 50% of its stock-trading move to its Amsterdam hub compared with three months prior, representing 70% of the overall value.

In the absence of a co-ordinated solution, Temporary Transitional Power is being used to modify the application of UK DTO as follows. The government is also considering extending, subject to certain conditions, the exemption from the DTO for the termination or replacement of component derivatives in portfolio compression to all non-price forming post-trade risk reduction services. Views are sought on whether the same exemptions should apply to the clearing obligation under U.K. An investment firm to operate a Systematic Internaliser and an OTF within the same legal entity where the two activities are clearly segregated. The EU MiFID II Quick Fix also amended the ancillary activities test; however, it is a more limited change than that posed by HM Treasury.

Impacts On Firms And Markets

HM Treasury is also contemplating granting the FCA a permanent power to modify or suspend the application of the DTO, after it has consulted with the government. This is based on how market disruption was avoided by the FCA using its temporary transitional power to amend the scope of the U.K. 2The UK formally left the EU on 31 January 2020 and a transition period immediately began, during which the EU and the UK have negotiated the details of their new relationship.

The regulator will use the Temporary Transitional Power to avoid disruption and allow firms to continue trading all shares on EU trading venues and systematic internalisers . This use of the TTP means that UK market participants will continue to be able to access any EU trading venue from the end of the implementation period, providing the venue has ensured it has the relevant regulatory permissions. MiFID II imposes pre- and post-trade transparency requirements for equity and non-equity financial instruments that aim to improve the quality and availability of market data and reduce the costs of purchasing data. The pre-trade transparency obligations require market operators and investment firms operating a trading venue to make public current bid and offer prices and the depth of trading interests at those prices which are advertised through their systems for equity and non-equity financial instruments. These reviews are not another ‘big bang’ implementation but instead propose targeted changes to the requirements that have not worked as expected . For more details on these reviews and how they impact the UK market vs EU please see the divergence tracker below.

This means that issuers with financial instruments also admitted to trading or traded on an EU trading venue will now be subject to a dual reporting obligation to the FCA and the relevant EU national competent authority. As there are currently limited “equivalence” decisions under the EU regulatory framework, compliance with overlapping regulatory requirements may be required. From a UK perspective, in July 2021, HMT has published its Wholesale Markets Review, which contains a number of proposals on changes to the transparency regime, the MiFID rules governing trading venues, and the functioning of equity markets.

On this basis, ESMA states that it expects NCAs not to prioritise actions in relation to the provisions in Articles 35 and 36 of MiFIR with respect to trading venues and CCPs that benefitted from transitional arrangements under Article 54 of MiFIR in respect of ETDs. ESMA expects to submit its final report to the European Commission in autumn 2021 and aims to ensure that the scope of derivatives classes subject to the CO and the DTO reflects the transition to the new alternative rates at the beginning of 2022. The FCA reiterates the statement it made in its March 2021 update that, while it expects firms to make the necessary preparations to ensure the relevant UK EMIR reports are updated in a timely manner, it will apply its supervisory powers for this requirement in a proportionate and risk-based manner. Recent UK and EU regulatory developments of interest to financial institutions and markets, including updates on UK MiFIR, EU MAR, SSR, EMIR, MiFIR and MiFID. Also check our supplementary Financial institutions general regulatory news of broader application in the Related Materials links. On 17 March 2021, France’s financial regulator, Autorité des Marchés Financiers , published its position in response to the European Commission’s consultation on the AIFMD.

The FCA continues to view the agreement of mutual equivalence between the UK and EU as the best way to avoid disruption for market participants and avoid fragmentation of liquidity in DTO products, reducing costs for investors. HM Treasury also points to areas where clarification would be beneficial, indicating that its preferred option would be to bring that about through regulatory guidance. HM Treasury recognizes that under the current definitions there is uncertainty as to whether a technology firm that allows investment firms to exchange trading interest and execute transactions with their clients needs to be authorized as an MTF.