On March 31, the UK Financial Conduct Authority (FCA) published its first policy statement (PS17/5) on implementation of the revised Markets in Financial Instruments Directive (MiFID II) into FCA rules.

In PS17/5, the FCA highlights several areas of its previous MiFID II consultations on which it received the most feedback:

  • Multilateral systems—in a previous consultation (CP15/43), the FCA consulted on draft perimeter guidance on “multilateral systems,” where it expressed the view that the activities that will be regulated as a trading venue under MiFID II are broader than under the original Markets in Financial Instruments Directive (MiFID). The FCA states that all of its final perimeter guidance will be published in its next policy statement. On the specific issue of the meaning of “multilateral systems,” the FCA states that the issue is being considered further by the European Securities and Markets Authority (ESMA) and the FCA will decide in light of any interpretative guidance from ESMA whether to provide its own perimeter guidance. Post-trade transparency deferrals—in CP15/43, the FCA consulted on allowing trading venues to use the post-trade deferrals, which national competent authorities (NCAs) are allowed to provide under MiFID II. The FCA states that it will allow venues to use the maximum permitted deferrals. The FCA adds that NCAs’ approach to the use of deferrals will not be harmonized across the European Union because of the national discretion provided in the Markets in Financial Instruments Regulation (MiFIR), but details of the regime in each member state will be published by ESMA.
  • Transaction reporting and collective portfolio managers and pension funds—in CP15/43, the FCA proposed that transaction reporting rules would only apply to firms required to transaction report under MiFID II. This would mean removing its current requirement for collective portfolio managers (including authorized UK alternative investment fund managers) and pension funds to transaction report because it did not think the benefits of requiring them to report transactions on the MiFID II basis would outweigh the costs. This remains the FCA’s view, and it will not require such firms to report transactions under MiFID II.
  • Transaction reporting and third parties—respondents to CP15/43 raised questions about the use by investment firms of third parties to provide transaction reports to Approved Reporting Mechanisms (ARMs) and the use of ARMs by trading venues. These questions led to the FCA proposing guidance in consultation paper CP16/43, which will be included in in the FCA’s final rules. The FCA also provided guidance that investment firms providing transaction reports to the FCA directly can use third parties to assist them, but must submit the reports to the FCA themselves.

The FCA has confirmed that issues consulted on in previous consultations that are not otherwise addressed in PS17/5 will be included in the FCA’s second policy statement on MiFID II implementation, which it plans to publish at the end of June. The FCA plans to finalize all of its MiFID II implementation rules at that time.

PS17/5 is available here.