Brokers, Proprietary Traders Facing New Regulatory Obligations Under MiFID II

The long-awaited MiFID II MiFID II MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s fina MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s fina Read this Term implementation deadline is steadily approaching. Ahead of January 3, 2018, the UK’s Financial Conduct Authority (FCA) Financial Conduct Authority (FCA) The Financial Conduct Authority (FCA) is the largest financial regulator for all financial markets in the United Kingdom (UK).The UK regulator is responsible for the conduct of firms authorized under the Financial Services and Markets Act 2000. Moreover, the FCA is also responsible for the regulation of behavior in retail and wholesale financial markets, supervision of the trading infrastructure that supports those markets, and the prudential regulation of firms not regulated by the PRA. Its rol The Financial Conduct Authority (FCA) is the largest financial regulator for all financial markets in the United Kingdom (UK).The UK regulator is responsible for the conduct of firms authorized under the Financial Services and Markets Act 2000. Moreover, the FCA is also responsible for the regulation of behavior in retail and wholesale financial markets, supervision of the trading infrastructure that supports those markets, and the prudential regulation of firms not regulated by the PRA. Its rol Read this Term) has issued its latest update, highlighting the need for proprietary traders and those providing them with market access to possibly require authorization under MiFID II.

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With less than four months until MiFID II comes into effect, a number of firms that are already authorized may require a further round of authorizations. More specifically, this may include Variation of Permission (VoP) to carry out activities in 2018.

MiFID II is poised to dramatically reshape the financial services industry. Today’s update is the latest example of the new regime mandating a series of changes to existing regulations for firms.

The latest directive from the FCA follows a previous call to submit and complete applications for VoP and relevant authorizations by July 3, 2017. By doing so, the FCA could guarantee the processing of applications ahead of the January 3, 2018 deadline.

Thus far, the process has progressed rather smoothly, with the FCA continuing to receive applications from a number of firms seeking to operate a trading venue or become a Data Reporting Services Provider (DRSP).

New regime, new rules

The additional authorization is relevant to venues that operate as unregulated proprietary traders accessing trading venues through a form of direct electronic access that is provided by regulated firms.

Such groups are instructed to consult the FCA’s application and notification user guide and handbook.

Furthermore, firms providing clients with direct electronic access to trading venues will have an obligation under MiFID II to carry out due diligence on prospective DEA clients. The FCA is therefore advising financial groups to work closely with their client bases to ensure they are aware of the potential need to become authorized in a timely manner.