MAR 5AC.3 Categorisation of activities of a DSD firm

1A person applying to be a DSD firm should discuss with the FCA and the Bank of England the activities it currently undertakes and the new activities it would undertake if it were to be successful in its application to be a DSD firm.

1Activities carried out for the purposes of enabling the DSD to carry out its core DSD functions may be listed as category 1 ancillary FMI activities in the DSD’s SAN, if it passes to gate 2.

1A sandbox entrant’s activities not carried on for the purposes of enabling a DSD to carry out its core DSD functions may be listed as category 2 ancillary FMI activities, if it passes to gate 2.

1Category 1 ancillary FMI activities may include the CSDR non-banking type ancillary services where these are carried on for the purposes of enabling the DSD to discharge its core DSD functions. Category 1 ancillary FMI activities exclude CSDR banking-type ancillary services.

1Core DSD functions and category 1 ancillary FMI activities included in a SAN are not regulated activities for the purposes of the Handbook.

1Category 2 ancillary FMI activities include activities ancillary to, but not carried on for the purpose of, enabling the DSD to act as such. This could include activities that have some connection to the core DSD functions but go beyond the scope of what would generally be considered core DSD functions.

1Category 2 ancillary FMI activities may include any CSDR banking type ancillary services relating to the DSD. The Bank of England does not expect to permit these to be conducted by any person other than a CRD credit institution with the appropriate authorisation.

1No requirements relating to the operation of a trading venue have been modified as part of the DSS Regulations. The FCA considers that operators of trading venues will continue to need to satisfy the relevant regulatory requirements that exist in the Handbook or otherwise within the regulatory system. A DSD can therefore expect any operation of a trading venue to form part of category 2 ancillary FMI activities, if it passes to gate 2.

1A sandbox entrant is required to have any necessary Part 4A permission for category 2 ancillary FMI activities before such activities can be included in its SAN and to maintain such permission for the duration of its participation in the digital securities sandbox. Similarly, where a sandbox entrant wishes to carry out activity, as a firm – ancillary to operating a trading venue – itself, as opposed to activity ancillary to the core DSD functions, it will require authorisation for these activities.

1A DSD firm requires authorisation or exemption, as appropriate, in relation to regulated activities it carries on by way of business in the United Kingdom, other than those which are treated as excluded as described in MAR 5AC.2.4G.

1Any core DSD functions, and any ancillary FMI activities which have been classified as category 1 ancillary FMI activities in a DSD’s SAN, are treated as unregulated activities for the purposes of the Handbook. As such, they may also be capable of being an ancillary activity, where there is a sufficient degree of connection to the firm’s regulated activities. In such a case, the corresponding Handbook requirements apply to the relevant activity.

1. (1)

   1A DSD, when carrying on category 2 ancillary FMI activities as a firm, may be carrying on:

   1. (a)

      regulated activities including MiFID business or designated investment business; or

   2. (b)

      unregulated activities including ancillary activity.

2. (2)

   In either case, corresponding Handbook requirements apply to the relevant activity.