On February 9, HM Treasury published its response (Response) to the consultation that ran from March 27, 2015, to June 18, 2015, on the transposition of the revised Markets in Financial Instruments Directive (MiFID II) into UK domestic law. The Response summarizes responses submitted to the consultation by market participants, as well as the government’s position.

The Response states that the government plans to present finalized statutory instruments for implementing MiFID II before parliament in early 2017. The response covers a number of different areas, including:

  • Third countries—Article 39 MiFID II (allowing member states to require a third country firm to establish a branch in their jurisdiction when they provide MiFID investment services and activities to retail or elective professional clients) will not be implemented and the United Kingdom’s current third-country regime, known as the “overseas persons exclusion,” will be maintained.
  • Data reporting services—An amendment has been made to the definition of “data reporting service” to refer directly to the services. The government will maintain a direct copy-out approach in relation to the definitions of Approved Reporting Mechanisms (ARMs), Approved Publication Arrangements (APAs) and Consolidated Tape Providers (CTPs).
  • Position limits and reporting—Contracts traded on a UK trading venue and a third-country market will follow the approach in MiFID II, and a trading entity authorized under MiFID II will be classified as an investment firm (for the purposes of aggregated position reporting by different categories of person). The Financial Conduct Authority (FCA) will separately publish its policy statement regarding the position reporting and management regime.
  • Unauthorized persons—Consideration will be given alongside the EU Benchmark Regulation, as to whether an amendment to the Financial Services and Markets Act 2000 (FSMA) is necessary with respect to unauthorized persons with proprietary rights to a benchmark in order to appropriately enforce the obligations in Article 37 of the Markets in Financial Instruments Regulation (MiFIR).
  • Power to remove board members—A standalone power in relation to investment firms has been created that is aligned with Article 69(2) (u) of MiFID II, giving regulators the power to require the removal of a natural person from the management board of an investment firm or market operator.
  • Organized trading facilities (OTF)—A notification regime will be provided for in the FCA rules in relation to recognized investment exchanges, investment firms and credit institutions operating an OTF and undertaking matched principal trading.
  • Binary options—Binary options will be treated as financial instruments.

The Response is available here.