Wed. Sep 23rd, 2020

Planet Compliance

Innovation & Regulation in Finance

FCA consults on MiFID II implementation

3 min read

The Financial Conduct Authority (FCA) has today published its second consultation paper (CP16/19) on the implementation of the Markets in Financial Instruments Directive II (MiFID II) in the UK.

Following the result of the United Kingdom’s (UK) referendum on its membership of the
European Union (EU) the FCA published a statement on 24 June in which it said: ‘Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.’
The Markets in Financial Instruments Directive (MiFID) II is in the category of legislation that is still to come into effect. It is due to apply from 3 January 2018, so both firms and the FCA need to continue with implementation plans.
Given the need to continue implementing MiFID II, this CP follows on from CP15/43, published in December 2015. In CP15/43 we set out the background to the introduction of MiFID II and its key objectives. CP15/43 mainly covered issues relating to the new rules in MiFID II governing the secondary trading of financial instruments. This CP covers a range of issues including the framework for position limits, management and reporting for commodity derivative contracts and the way that firms organise themselves to do business and comply with their regulatory obligations.
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The original MiFID, introduced in 2007, set the regulatory framework for the buying, selling and organised trading of shares, bonds, units in collective investment schemes and derivatives across the European Union. MiFID II is revising the original directive to introduce substantial and wide ranging measures designed to improve investor protection and promote market integrity, and to meet G20 commitments on reforming and strengthening derivatives markets.

MiFID II takes effect on 3 January 2018, and this consultation paper forms part of the FCA’s process to make the necessary changes to the FCA’s Handbook to implement it. As much of MiFID II is in directly applicable obligations, the FCA and firms need to fulfil their legal responsibilities from the point they come into force. The consultation paper published today covers a range of issues including position limits and reporting for commodity derivatives, systems and controls requirements for firms providing MiFID investment services and client asset protections.

Andrew Bailey, Chief Executive of the FCA, commented:

“MiFID II contains important measures to enhance investor protection and bolster financial stability. It reflects recent themes of UK conduct regulation, such as improved controls on the manufacturing and distribution of financial products, and it implements the international commitments the UK entered into to reform derivatives markets following the financial crisis. As we said in our statement following the EU referendum, firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.”

The FCA published its first consultation paper, covering mainly markets issues, on MiFID II on 15 December 2015 (CP15/43). There will be a further consultation paper later this year. This will mostly be on changes to our Conduct of Business sourcebook.

The closing date for responses to consultation paper CP16/19 is 28 October 2016.

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