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You are viewing the version of the document as on 2022-09-30.

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    2022-09-30

MIFIDPRU 10.3 Application of K-DTF requirement to clearing activities

MIFIDPRU 10.3.1R
  1. (1)

    1This rule applies to transactions in financial instruments in relation to which a MIFIDPRU investment firm provides clearing services in its capacity as a clearing member or an indirect clearing firm.

  2. (2)

    Except where MIFIDPRU 10.3.2R applies, a firm must include the transactions in (1) in its calculation of DTF for the purposes of the K-DTF requirement in accordance with the remainder of this rule.

  3. (3)

    The transactions in (1) must be included in a firm’s DTF on the following basis:

    1. (a)

      where the order that gave rise to the clearing transaction was a cash trade, the clearing transaction must also be treated as if it were a cash trade (irrespective of whether it would otherwise meet that definition); and

    2. (b)

      where the order that gave rise to the clearing transaction was a derivatives trade, the clearing transaction must also be treated as if it were a derivatives trade (irrespective of whether it would otherwise meet that definition).

MIFIDPRU 10.3.2R
  1. (1)

    1This rule applies where a firm:

    1. (a)

      executes an order:

      1. (i)

        in its own name (whether for its own account or on behalf of a client); or

      2. (ii)

        in the name of a client; and

    2. (b)

      also provides clearing services in its capacity as a clearing member or indirect clearing firm in relation to a transaction that results from the order in (a).

  2. (2)

    1Where this rule applies, the value of the relevant order in (1)(a) is not included in the firm’s measurement of DTF attributable to clearing services under MIFIDPRU 10.3.1R, provided that the value of the order has already been included in one of the following in relation to the firm’s execution services:

    1. (a)

      the calculation of the firm’s COH under MIFIDPRU 4.10 (K-COH requirement); or

    2. (b)

      the calculation of the firm’s DTF under MIFIDPRU 4.15 (K-DTF requirement).

MIFIDPRU 10.3.3G
  1. (1)

    1MIFIDPRU 10.3.1R requires a MIFIDPRU investment firm to calculate an additional K-DTF requirement for any clearing transactions it undertakes in relation to financial instruments.

  2. (2)

    MIFIDPRU 10.3.2R applies to a MIFIDPRU investment firm that both executes an order and subsequently provides clearing services in relation to the resulting transaction (including where the firm is acting as a self-clearing firm). In this case, the firm is not required to include the clearing transaction in its calculation of DTF, provided that the value of the original executed order has already been included in either the firm’s measurement of its DTF or COH.

  3. (3)

    The intention of MIFIDPRU 10.3.2R is that a firm is not required to “double-count” the value of the original order and the resulting clearing transaction where the firm is involved in both executing and clearing the same trade.

MIFIDPRU 10.3.4R

1Where prudential consolidation applies to a UK parent entity under MIFIDPRU 2.5.7R, the UK parent entity must include within the calculation of its consolidated K-DTF requirement any transactions that are cleared by clearing members or indirect clearing firms that are included within its consolidated situation.