Brokers, Proprietary Traders Facing New Regulatory Obligations Under MiFID II

UK-regulated venues may require an additional round of authorization ahead of MiFID's implementation this January.

The long-awaited MiFID II implementation deadline is steadily approaching. Ahead of January 3, 2018, the UK’s Financial Conduct Authority (FCA) 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.

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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.

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