Related provisions for BIPRU 13.5.23
1Activity |
Products/Sectors |
Is there an appropriate qualification4requirement? 4 |
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Designated investment business carried on for a retail client |
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Providing basic advice |
1. |
Stakeholder products excluding a deposit-based stakeholder product |
No |
Advising or giving personal recommendations (as relevant)13 |
2. |
Giving personal recommendations on securities13 which are not stakeholder pension schemes, personal pension schemes7 or broker funds |
Yes |
3. |
Giving personal recommendations on derivatives13 |
Yes2 |
|
4. |
Giving personal recommendations on retail investment products13 which are not broker funds 66 |
Yes2 |
|
5. |
Giving personal recommendations on13Friendly Societylife policies where the employee is not reasonably expected to receive a remuneration of greater than £1000 a year in respect of such sales |
No2 |
|
6. |
Giving personal recommendations on13Friendly Society tax-exempt policies (other than Holloway sickness policies where the Holloway policy special application conditions are met)5 |
Yes2 |
|
7. |
Giving personal recommendations on long-term care insurance contracts13 |
Yes2 |
|
8. |
Giving personal recommendations on investments13 in the course of corporate finance business |
Yes2 |
|
9. |
Yes2 |
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129A. |
Yes |
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Undertaking the activity in column 2 |
10. |
Yes |
|
11. |
Yes2 |
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Giving personal recommendations13 and dealing |
12. |
Giving personal recommendations on and dealing in securities13 which are not stakeholder pension schemes, personal pension schemes7 or broker funds |
Yes |
13. |
Giving personal recommendations on and dealing in derivatives13 |
Yes2 |
|
4Dealing |
13A.8 |
Securities which are not stakeholder pension schemes, personal pension schemes7 or broker funds |
No |
No |
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13C15 |
No15 |
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8 | 14 | ||
Managing |
14. |
Yes |
|
Overseeing on a day-to-day basis |
15. |
Operating a collective investment scheme or undertaking the activities of a trustee or depositary of a collective investment scheme |
Yes |
16. |
Safeguarding and administering investments or holding client money |
Yes2 |
|
17. |
Administrative functions in relation to managing investments |
Yes2 |
|
18. |
Administrative functions in relation to effecting or carrying out contracts of insurance which are life policies |
Yes2 |
|
19. |
Administrative functions in relation to the operation of stakeholder pension schemes |
Yes2 |
|
Mortgage Activity10 and reversion activity carried on for a customer 10 |
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910Advising; arranging (bringing about) an execution-only sale, excluding variations to an existing home finance transaction except where the effect is to change all or part of the home finance transaction from one interest rate to another. See Note 3, which for the avoidance of doubt forms part of this rule. |
20 |
Regulated mortgage contracts for a non-business purpose |
Yes |
20A |
Regulated mortgage contracts for a business purpose |
No |
|
21 |
Yes |
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9Designing scripted questions for execution-only sales |
21A |
Regulated mortgage contracts for a non-business purpose |
Yes |
21B |
Regulated mortgage contracts for a business purpose |
No |
|
22 |
Yes |
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Overseeing execution-only sales on a day-to-day basis9 9 |
23. |
Yes |
|
11MCD credit agreement activities carried on for consumers |
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11manufacturing |
23A |
No |
|
11entering into a regulated mortgage contract or entering into a regulated credit agreement as lender |
23B |
No |
|
11arranging (bringing about) regulated mortgage contracts or acting as an MCD credit broker |
23C |
No |
|
11advising on a regulated mortgage contract or advising on a regulated credit agreement for the acquisition of land |
23D |
No |
|
11directly managing or supervising employees who carry on any of the MCD credit agreement activities 23A to 23D |
23E |
No |
|
Non-investment insurance business carried on for a consumer |
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Giving personal recommendations13 |
24. |
Giving personal recommendations on non-investment insurance contracts13 |
No |
3Regulated sale and rent back activity carried on for a customer |
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Advising |
25. |
No |
|
Overseeing an execution-only sale10 on a day-to-day basis 10 |
26. |
No |
|
16Regulated funeral plan activity carried on for a customer |
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27 |
No |
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28 |
No |
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16Making arrangements with a view to transactions in investments |
29 |
No |
|
30 |
No |
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31 |
No |
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32 |
No |
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33 |
No |
||
34 |
No |
||
35 |
No |
||
36 |
No |
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37 |
No |
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Notes: |
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1. |
In the Appendix the heading and types of business specified in the headings are to be read in conjunction with the paragraphs appearing beneath them. |
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2. |
Thus, for example, paragraph 24,13 consistent with the heading above it, refers only to personal recommendations given in relation to13non-investment insurance contracts given to a consumer.10 33 |
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122A. |
In relation to activity number 9A, see TC 2.1.5HR and TC 2.1.6R(2). There is no qualification for this activity in the list of qualifications set out in TC Appendix 4E. However, the effect of TC 2.1.5HR is that an employeeadvising on P2P agreements must be qualified to the same standard as if that employee were providing investment advice to retail clients on retail investment products. |
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103. |
For the purpose of product numbers 20, 20A and 21 the activity of arranging (bringing about) referred to in the activity column: (a) includes activity which would be arranging (bringing about) but for the exclusion in article 28A of the Regulated Activities Order; and (b) does not include activities which taken on their own would not fall within the definition of that activity. For these purposes no account should be taken of the fact that for an activity to be a regulated activity it must be carried on by way of business (see PERG 4.3). |
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4. |
In this Appendix, paragraphs 23A, 23B, 23C, 23D and 23E relate to the implementation of article 9(1) of the MCD. The specified activities do not, in and of themselves, attract a qualification requirement. However, where those activities overlap with those specified under the heading "mortgage activity and reversion activity carried on for a customer", qualification requirements may apply. |
Part II RAO Activities13 |
Part III RAO Investments |
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1. |
Reception and transmission of orders in relation to one or more financial instruments |
Article 252 |
Article 76-81, 82B,12 83-85, 89 |
2. |
Execution of orders on behalf of clients |
Article 14, 21 |
A Article 76-81,82B,12 83-85, 89 |
3. |
Dealing on own account |
Article 14 |
Article 76-81, 82B,12 83-85, 89 |
4. |
Portfolio management |
Article 37 (14, 21, 25 - see Note 1) 2 |
Article 76-81, 82B,12 83-85, 89 |
5. |
Investment advice |
Article 53(1)10 |
Article 76-81, 82B,12 83-85, 89 |
6. |
Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis |
Article 14, 21 |
Article 76-81, 82B,12 83-85, 89 |
7. |
Placing of financial instruments without a firm commitment basis |
Article 21, 25 |
Article 76-81, 82B,12 83-85, 89 |
8. |
Operation of Multilateral Trading Facilities |
Article 25D5 (see Note 2) 5 |
Article 76-81, 82B,12 83-85, 89 |
12 9. |
Operation of an OTF |
Article 25DA (see Note 3) |
Article 77, 77A, 78, 79, 80, 81, 82B, 83-85, 89 |
Ancillary services |
Part II RAO Activities |
Part III RAO Investments |
|
1. |
Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management |
Article 40, 45, 64 |
Article 76-81, 82B,12 83-85, 89 |
2. |
Granting credits or loans to an investor to allow him to carry out a transaction in one or more of the relevant instruments where the firm granting the credit or loan is involved |
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3. |
Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings |
Article 14, 21, 25, 53(1)10, 64 |
Article 76-80, 82B,12 83-85, 89 |
4. |
Foreign exchange services where these are connected with the provision of investment services |
Article 14, 21, 25, 53(1)10, 64 |
Article 83-85, 89 |
5. |
Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments |
Article 76-81, 82B,12 83-85, 89 |
|
6. |
Services related to underwriting |
Article 25, 53(1)10, 64 |
Article 76-81, 82B,12 83-85, 89 |
7. |
Investment services and activities as well as ancillary services of the type included under Section A or B of Annex I related to the underlying of the derivatives included under Section C 5, 6, 7 and 10-where these are connected to the provision of investment or ancillary services. |
Article 14, 21, 25, 25D,5 37, 53(1)10, 64 5 |
Article 83 and 84 |
Note 1. A firm may also carry on these other activities when it is managing investments.2 |
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Note 2. A firm operating an MTF under article 25D5 does not need to have a permission covering other regulated activities, unless it performs other regulated activities in addition to operating an MTF. 5 |
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Note 3. A firm operating an OTF under article 25DA does not need to have a permission covering other regulated activities, unless it performs other regulated activities in addition to operating an OTF.12 |
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13Note 4: A firm which provides investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments does not need permission under article 53(1) of the Regulated Activities Order if it is appropriately authorised (see article 53(1) to (1D) of the Regulated Activities Order). |
1COBS applies as set out in the table to firms in respect of activities referred to in the general application rule related to:
- (1)
- (2)
- (3)
contracts for differences related to an underlying commodity; or
- (4)
other futures or contracts for differences which are not related to commodities, financial instruments or cash;
which is not MiFID or equivalent third country business and energy market activity or oil market activity.
Application of COBS to other non-MiFID business related to commodity derivative instruments |
All of COBS applies, except COBS 18.2.6 R to COBS 18.2.9 E applies instead of COBS 11.2 (Best execution) |
Schedule to the Recognition Requirements Regulations, Paragraph 9A-9H3
1(1) |
[A UK RIE] operating a multilateral trading facility or an organised trading facility3 must also operate a regulated market3. |
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(2) |
An exchange5 operating a multilateral trading facility or an organised trading facility3 must comply with those requirements of- |
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(a) |
any provisions of the law of the United Kingdom relied on by the United Kingdom before IP completion day to implement Chapter 1 of Title II of the markets in financial instruments directive—5 3 |
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(i) |
as they have effect on 1 December 20216, in the case of rules made by the FCA under the Act; and5 |
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(ii) |
as amended from time to time, in all other cases;5 |
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(b) |
any EU regulation originally made under Chapter 1 of the markets in financial instruments directive which is retained direct EU legislation, or any subordinate legislation (within the meaning of the Interpretation Act 1978) made under those provisions on or after IP completion day;5 3 |
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which are applicable to a market operator35operating such a facility. |
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(3) |
The requirements of this paragraph do not apply for the purposes of section 292(3)(a) of the Act (requirements for overseas investment exchanges and overseas clearing houses). |
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(4)3 |
A [UK RIE] operating a multilateral trading facility or organised trading facility must provide the FCA with a detailed description of - |
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(a) |
the functioning of the multilateral trading facility or organised trading facility; |
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(b) |
any links to another trading venue owned by the same [UK RIE] or to a systematic internaliser owned by the same exchange; and |
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(c) |
a list of the facility’s members, participants and users. |
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[Note:MiFID ITS 19 prescribes the content and format of the description of the functioning of a MTF or OTF to be provided to the FCA]3 |
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(5)3 |
Any multilateral trading facility or an organised trading facility operated by the [UK RIE] must have at least three materially active members or users who each have the opportunity to interact with all the others in respect of price formation. |
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Paragraph 9B – Specific requirements for multilateral trading facilities: execution of orders3 |
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(1)3 |
A [UK RIE] must have non-discretionary rules for the execution of orders on a multilateral trading facility operated by it. |
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(2)3 |
A [UK RIE] must not on a multilateral trading facility operated by it - |
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(a) |
execute any client orders against its proprietary capital; or |
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(b) |
engage in matched principal trading. |
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Paragraph 9C – Specific requirements for multilateral trading facilities: access to a facility3 |
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The rules of the [UK RIE] about access to, or membership of, a multilateral trading facility regulated market operated by it must permit the [UK RIE] to give access to or admit to membership to (as the case may be) only -3 |
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(a) |
an investment firm which has permission under Part 4A of the Act to carry on a regulated activity which is an investment service or activity5; |
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(b) |
a qualifying credit institution that has Part 4A permission to carry on the regulated activity of accepting deposits.5 |
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(c) |
a person who – |
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(i) |
is of sufficient good repute; |
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(ii) |
has a sufficient level of trading ability, and competence and experience; |
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(iii) |
where applicable, has adequate organisational arrangements; and |
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(iv) |
has sufficient resources for the role it is to perform, taking account of the financial arrangements the [UK RIE] has established in order to guarantee the adequate settlement transactions. |
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Paragraph 9D – Specific requirements for multilateral trading facilities: disclosure3 |
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(1)3 |
The rules of the [UK RIE] must provide that where it, without obtaining the consent of the issuer, admits to trading on a multilateral trading facility operated by it a transferable security which has been admitted to trading on a regulated market, the [UK RIE] may not require the issuer of that security to demonstrate compliance with the disclosure obligations. |
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(2)3 |
The [UK RIE] must maintain arrangements to provide sufficient publicly available information (or satisfy itself that sufficient information is publicly available) to enable users of a multilateral trading facility operated by it to form investment judgements, taking into account both the nature of the users and the types of instruments traded. |
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(3)3 |
In this paragraph, “the disclosure obligations” has the same meaning as in paragraph 9ZB. |
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Paragraph 9E – SME growth markets3 |
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(1)3 |
A [UK RIE] operating an SME growth market5 (an “exchange-operated SME growth market”) must comply with rules made by the FCA for the purposes of this paragraph as they have effect on IP completion day5. |
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[Note:REC 2.16A.1D]4 |
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(2)3 |
An exchange-operated SME growth market must not admit to trading a financial instrument which is already admitted to trading on another SME growth market unless the issuer of the instrument has been informed of the proposed admission to trading and has not objected. |
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(3)3 |
Where an exchange-operated SME growth market exchange admits a financial instrument to trading in the circumstances of paragraph (2), that exchange-operated SME growth market may not require the issuer of the financial instrument to demonstrate compliance with - |
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(a) |
any obligation relating to corporate governance, or |
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(b) |
the disclosure obligations. |
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(4)3 |
In this paragraph, “the disclosure obligations” has the same meaning as in paragraph 9ZB. |
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Paragraph 9F – Specific requirements for organised trading facilities: execution of orders3 |
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(1)3 |
[A UK RIE] operating an organised trading facility must - |
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(a) |
execute orders on that facility on a discretionary basis in accordance with sub-paragraph (4); |
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(b) |
not execute any client orders on that facility against its proprietary capital or the proprietary capital of any entity that is part of the same group or legal person as the [UK RIE] unless in accordance with sub-paragraph (2); |
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(c) |
not operate a systematic internaliser within the same legal entity; |
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(d) |
ensure that the organised trading facility does not connect with a systematic internaliser in a way which enables orders in an organised trading facility and orders or quotes in a systematic internaliser to interact; and |
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(e) |
ensure that the organised trading facility does not connect with another organised trading facility in a way which enables orders in different organised trading facilities to interact. |
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(2)3 |
A [UK RIE] may only engage in - |
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(a) |
matched principal trading on an organised trading facility operated by it in respect of- |
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(i) |
bonds, |
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(ii) |
structured finance products, |
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(iii) |
emission allowances, |
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(iv) |
derivatives which have not been declared subject to the clearing obligation in accordance with Article 5 of the EMIR regulation, |
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where the client has consented to that; or |
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(b) |
dealing on own account on an organised trading facility operated by it, otherwise than in accordance with sub-paragraph (a), in respect of sovereign debt instruments for which there is not a liquid market. |
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(3)3 |
If the [UK RIE] engages in matched principal trading in accordance with sub-paragraph (2)(a) it must establish arrangements to ensure compliance with the definition of matched principal trading5. |
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(4)3 |
The discretion which the [UK RIE] must exercise in executing a client order may only be the discretion mentioned in sub-paragraph (5) or in sub-paragraph (6) or both. |
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(5)3 |
The first discretion is whether to place or retract an order on the organised trading facility. |
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(6)3 |
The second discretion is whether to match a specific client order with other orders available on the organised trading facility at a given time, provided the exercise of such discretion is in compliance with specific instructions received from the client and in accordance with the [UK RIE’s] obligations under—5 |
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(a) |
section 11.2A of the Conduct of Business sourcebook;5 |
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(b) |
Articles 64 to 66 of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive;5 |
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(c) |
[deleted]6 5 |
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(d) |
[deleted]6 5 |
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(7)3 |
Where the organised trading facility crosses client orders the [UK RIE] may decide if, when and how much of two or more orders it wants to match within the system. |
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(8)3 |
Subject to the requirements of this paragraph, with regard to a system that arranges transactions in non-equities, the [UK RIE] may facilitate negotiation between clients so as to bring together two or more comparable potentially trading interests in a transaction. |
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(9)3 |
The [UK RIE] must comply with rules made by the FCA as they have effect on 1 December 20216 as to how Articles 24, 25, 27 and 28 of the markets in financial instruments directive apply to its operation of an organised trading facility. 5 |
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(10)3 |
Nothing in this paragraph prevents a [UK RIE] from engaging an investment firm to carry out market making on an independent basis on an organised trading facility operated by the [UK RIE]provided the investment firm does not have close links with the [UK RIE]. |
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(11)3 |
In this paragraph - “close links” has the meaning given in Article 2(1)(21) of the markets in financial instruments regulation;5 “investment firm” has the meaning given in Article 2(1A) of the markets in financial instruments regulation;5 “non-equities” means bonds, structured finance products, emissions allowances and derivatives traded on a trading venue to which Article 8(1) of the markets in financial instrument regulation applies. |
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Paragraph 9G – Specific requirements for organised trading facilities: disclosure3 |
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(1)3 |
The rules of the [UK RIE] must provide that where it, without obtaining the consent of the issuer, admits to trading on an organised trading facility operated by it a transferable security which has been admitted to trading on a regulated market, the [UK RIE] may not require the issuer of that security to demonstrate compliance with the disclosure obligations. |
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(2)3 |
The [UK RIE] must maintain arrangements to provide sufficient publicly available information (or satisfy itself that sufficient information is publicly available) to enable users of the organised trading facility operated by it to form investment judgements, taking into account both the nature of the users and the types of instruments traded. |
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(3)3 |
In this paragraph, “the disclosure obligations” has the same meaning as in paragraph 9ZB. |
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Paragraph 9H – Specific requirements for organised trading facilities: FCA request for information3 |
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(1)3 |
A [UK RIE] must, when requested to do so, provide the FCA with a detailed explanation in respect of an organised trading facility operated by it, or such a facility it proposes to operate, of - |
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(a) |
why the organised trading facility does not correspond to and cannot operate as a multilateral trading facility, a regulated market or a systematic internaliser; |
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(b) |
how discretion will exercised in executing client orders, and in particular when an order to the organized trading facility may be retracted and when and how two or more client orders will be matched within the facility; and |
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(c) |
its use of matched principal trading. |
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(2)3 |
Any information required under sub-paragraph (1) must be provided to the FCA in the manner which it considers appropriate. |