UK Regulator Consults on Implementing the Revised Markets in Financial Instruments Directive

The Financial Conduct Authority published proposals for implementing certain aspects of the revised Markets in Financial Instruments Directive, which together with the Markets in Financial Instruments Regulation is known as MiFID II. The revised MiFID must be transposed into the national laws of Member States whereas MiFIR is directly applicable across the EU. MiFID II is currently due to apply from January 3, 2017 although there have been discussions between the European authorities about possibly delaying this date. On the existing timeline, Member States must transpose the revised MiFID into their national laws by July 3, 2016.

The FCA's consultation covers broadly the following topics: (i) algorithmic trading and high frequency trading requirements for regulated markets, multilateral trading facilities and organised trading facilities, including business continuity, systems and controls, financial crime, market abuse, direct electronic access and tick sizes; (ii) new transparency requirements for equity-like and non-equity markets, including pre-transparency waivers and post-transparency deferrals; (iii) requirements for OTFs, a new type of trading venue introduced by MiFID II; (iv) requirements for data reporting services providers, a new type of firm under MiFID II; (v) extension of the Principles of Business to firms that conduct business with Eligible Counterparty clients; (vi) changes applicable to systematic internalisers; and (vii) passporting requirements and requirements for UK branches of non-EEA firms.

The FCA is also consulting on proposed changes to its Perimeter Guidance manual to take into account the expanded scope of MiFID II for investment services, activities and financial instruments. The FCA has prepared a proposed MiFID II Handbook Guide for trading venues and data reporting service providers which sets out the FCA's proposed approach to implementing MiFID II. The FCA will consider expanding the Guide to other firms as the FCA consults on implementing other aspects of MiFID II. For directly applicable regulations, the FCA intends to include references to the relevant regulations in its Handbook. That approach will apply subject to certain exceptions, such as when the FCA exercises a discretion provided for under the relevant regulation.

Responses to the consultation are due by March 8, 2016. A Policy Statement and final rules on the areas covered in this consultation will be published in the Q2 2016. The FCA intends to issue further consultations on the implementation of MiFID II in the first half of 2016 covering amendments on conduct of business, senior management systems and controls, client assets and enforcement.

View the consultation paper.