FCA publishes ‘near final’ MiFID II rules, issues call for authorisation applications

The UK Financial Conduct Authority has today published what it says are “near final” rules on the implementation of the Markets in Financial Instruments Directive II, and issued an update of its position on the taping of telephone conversations by retail financial advisers.

The new MiFID II regulations, which have been in the works for years, include changes to the rules which govern the way financial instruments are traded, including issues affecting trading venues, transparency of trading and algorithmic and high frequency trading.

The new rules update the original MiFID regulatory framework, which has been in force across the European Union since November, 2007, and which is regarded as a cornerstone of the EU’s regulation of financial markets. The UK’s FCA is responsible for seeing to it that the new rules are implemented in Britain, at least as long as it remains a part of the European Union.

In a statement today, the FCA said firms that will be impacted by the MiFID II changes should now apply for authorisation or for variations of permission, “or risk being unable to operate in the UK market after 3 January 2018, when MiFID II takes effect”.

According to the FCA, the near final rules cover:

• Information about the new requirement for firms that fall into the new Data Reporting Services Providers category to be authorised;
• position limits and reporting for commodity derivatives; and
• systems and controls requirements for firms providing MiFID investment services

The FCA said it plans to finalise the MiFID II rules in a further policy statement in June, which will cover remaining issues, including the conduct of business, perimeter guidance, and client asset protections. However, Christopher Woolard, executive director of Strategy and Competition at the FCA, said the authority “does not expect to make any significant changes to these rules before they are finalised in June, and therefore, firms should not delay.”

Companies that are to be covered by the MiFID II regulations, he stressed, therefore should “submit their applications now”.

Organisations affected by MiFID II include investment banks, interdealer brokers, high frequency traders, trading venues, stockbrokers, investment managers, commodity derivatives traders and financial advisers, and the two new types of authorised entity: organised trading facilities and data reporting services providers.


With respect to the matter of the taping of telephone conversations by retail financial advisory firms, meanwhile, the FCA said that, having considered consultation feedback in the context of MiFID requirements, it had agreed with those who argued that the business model of many of these firms is such that a full taping obligation might not always be appropriate.

Therefore, it said, the FCA “will allow retail financial advisers to comply with the ‘at least analogous’ requirement, by either taping all relevant phone conversations, or taking a written note of those conversations”.

Also today, it noted, it is publishing a fifth MiFID II consultation paper, which covers new rules for occupational pension scheme firms, and the extension of the FCA powers within its Enforcement Guide and Decision Procedures and Penalties Manual.

The near final rules, which may be downloaded in a 452-page pdf document, may be accessed on the FCA’s website by clicking here.  Information about the latest MiFID II consultation and MiFID II generally may be found by clicking here.

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