The Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges , Clearing Houses and Central Securities Depositories ) Regulations 2001

[F1 Specific requirements for organised trading facilities: execution of orders U.K.

Textual Amendments

F1 Sch. paras. 9B-9I and cross-headings inserted (29.6.2017 for specified purposes, 3.7.2017 for specified purposes, 31.7.2017 for specified purposes, 3.1.2018 in so far as not already in force) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 3 para. 1(17) (with reg. 7)

9F.— (1) An exchange operating an organised trading facility must— U.K.

(a) execute orders on that facility on a discretionary basis in accordance with sub-paragraph (4);

(b) not execute any client orders on that facility against its proprietary capital or the proprietary capital of any entity that is part of the same group or legal person as the exchange unless in accordance with sub-paragraph (2);

(c) not operate a systematic internaliser within the same legal entity;

(d) ensure that the organised trading facility does not connect with a systematic internaliser in a way which enables orders in an organised trading facility and orders or quotes in a systematic internaliser to interact; and

(e) ensure that the organised trading facility does not connect with another organised trading facility in a way which enables orders in different organised trading facilities to interact.

(2) An exchange may only engage in—

(a) matched principal trading on an organised trading facility operated by it in respect of—

(i) bonds,

(ii) structured finance products,

(iii) emission allowances, and

(iv) derivatives which have not been declared subject to the clearing obligation in accordance with Article 5 of the EMIR regulation,

where the client has consented to that; or

(b) dealing on own account on an organised trading facility operated by it, otherwise than in accordance with paragraph (a), in respect of sovereign debt instruments for which there is not a liquid market.

(3) If the exchange engages in matched principal trading in accordance with sub-paragraph (2)(a) it must establish arrangements to ensure compliance with the definition of matched principal trading F2 ....

(4) The discretion which the exchange must exercise in executing a client order may only be the discretion mentioned in sub-paragraph (5) or in sub-paragraph (6) or both.

(5) The first discretion is whether to place or retract an order on the organised trading facility.

(6) The second discretion is whether to match a specific client order with other orders available on the organised trading facility at a given time, provided the exercise of such discretion is in compliance with specific instructions received from the client and in accordance with the exchange's obligations [F3 under—

(a) section 11.2A of the Conduct of Business sourcebook,

(b) Articles 64 to 66 of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive,

F4 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(7) Where the organised trading facility crosses client orders the exchange may decide if, when and how much of two or more orders it wants to match within the system.

(8) Subject to the requirements of this paragraph, with regard to a system that arranges transactions in non-equities, the exchange may facilitate negotiation between clients so as to bring together two or more potentially comparable trading interests in a transaction.

(9) The exchange must comply with rules made by the FCA [F6 as they have effect on [F7 1st December 2021]] as to how Articles 24, 25, 27 and 28 of the markets in financial instruments directive apply to its operation of an organised trading facility.

(10) Nothing in this paragraph prevents an exchange from engaging an investment firm to carry out market making on an independent basis on an organised trading facility operated by the exchange provided the investment firm does not have close links with the exchange.

(11) In this paragraph—

“close links” has the meaning given in [F8 Article 2(1)(21) of the markets in financial instruments regulation];

“investment firm” has the meaning given in [F9 Article 2(1A) of the markets in financial instruments regulation];

“non-equities” means bonds, structured finance products, emission allowances and derivatives traded on a trading venue to which Article 8(1) of the markets in financial instrument regulation applies.]

Textual Amendments

F2 Words in Sch. para. 9F(3) omitted (31.12.2020) by virtue of The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/662), regs. 1(3), 20(16)(a) (with savings in S.I. 2019/680, reg. 11 (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f))); 2020 c. 1, Sch. 5 para. 1(1)

F3 Words in Sch. para. 9F(6) substituted (31.12.2020) by The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/662), regs. 1(3), 20(16)(b) (with savings in S.I. 2019/680, reg. 11 (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f))); 2020 c. 1, Sch. 5 para. 1(1)

F4 Sch. para. 9F(6)(c) omitted (26.7.2021) by virtue of The Markets in Financial Instruments (Capital Markets) (Amendment) Regulations 2021 (S.I. 2021/774), regs. 1(2), 2(4)(a)

F5 Sch. para. 9F(6)(d) omitted (26.7.2021) by virtue of The Markets in Financial Instruments (Capital Markets) (Amendment) Regulations 2021 (S.I. 2021/774), regs. 1(2), 2(4)(a)

F6 Words in Sch. para. 9F(9) inserted (31.12.2020) by The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/662), regs. 1(3), 20(16)(c) (with savings in S.I. 2019/680, reg. 11 (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); and as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 37(g)(vi)); 2020 c. 1, Sch. 5 para. 1(1)

F7 Words in Sch. para. 9F(9) substituted (1.12.2021) by The Markets in Financial Instruments (Capital Markets) (Amendment) Regulations 2021 (S.I. 2021/774), regs. 1(3), 2(4)(b)

F8 Words in Sch. para. 9F(11) substituted (31.12.2020) by The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/662), regs. 1(3), 20(16)(d)(i) (with savings in S.I. 2019/680, reg. 11 (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1)

F9 Words in Sch. para. 9F(11) substituted (31.12.2020) by The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/662), regs. 1(3), 20(16)(d)(ii) (with savings in S.I. 2019/680, reg. 11 (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f))); 2020 c. 1, Sch. 5 para. 1(1)