On August 31, the UK Financial Conduct Authority (FCA) published minutes from a roundtable (Roundtable) held on August 3 with trade associations. The Roundtable was held as part of ongoing discussions in relation to the application and implementation of the revised and recast Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation (jointly referred to as MiFID II).
The FCA noted at the Roundtable that most MiFID II regulatory technical standards (RTS) and implementing technical standards (ITS) have now been adopted by the European Commission (EC). However, the FCA noted that the RTS on indirect clearing, position limits and the ancillary exemption for commercial firms trading commodity derivatives had not yet been adopted. The FCA also noted that some RTS adopted by the EC are being treated as having amendments, which subjects them to a further three-month period of review. The FCA is thus of the view that the implementing legislation for MiFID II will not be finalized (and the finalized text will not be published in the Official Journal of the European Union) until the end of 2016 at the earliest.
The FCA updated the Roundtable on the European Securities and Markets Authority’s (ESMA’s) progress with developing “level 3” guidance for MiFID II in relation to investor protection, secondary markets, commodity derivatives and market data. In terms of secondary markets, the FCA reported that ESMA is developing a discussion paper on the derivatives trading obligation in addition to guidelines on trading halts and management bodies of regulated markets. The FCA confirmed that ESMA also is developing a Q&A on various topics, including: (1) the definition of a “multilateral system”; (2) the differences between multilateral trading facilities and organized trading facilities; (3) Article 2(1)(d) of MiFID II (which provides a limited exemption for persons dealing on own account from MiFID II); (4) the meaning of “traded on a trading venue,” transparency requirements, organizational requirements for investment firms and trading venues engaged in algorithmic trading; and (5) access to market infrastructure and benchmarks (among others). The FCA expects ESMA to publish the Q&A for secondary markets at some point after the summer. The Roundtable minutes note that ESMA cannot progress significantly with developing interpretive guidance on commodity derivatives until the associated implementing measures are complete.
In terms of UK implementation, the FCA confirmed that it intends to allow for authorization applications and variations of permission in January 2017, although this will be dependent on MiFID II legislation being finalized and published.
The FCA’s MiFID II Roundtable minutes are available here.