The Financial Conduct Authority (FCA) has responded to the European Securities and Markets Authority (ESMA’s) statement clarifying its approach to aspects of the Markets in Financial Instruments Directive (MiFID) position limits regime in the outcome of a no-deal Brexit.
The FCA’s response focused on ESMA’s approach to post-trade transparency requirements between EU investment firms and UK counterparties and derivatives trading obligations in the event of a no-deal Brexit.
Concerning post-trade transparency and position limits, the FCA said the Treasury’s approach to the onshoring of EU legislation into UK law means that UK and EU trading venues will operate to the same set of standards from the first day after the UK leaves the EU.
It added: “Consequently, if the UK leaves the EU without an implementation period we will not require UK investment firms to make public, through a UK Approved Publication Arrangement (APA), transactions conducted on EU trading venues in instruments which are also traded on a trading venue in the UK.”
For post-trade transparency and over-the-counter transactions between UK investment firms and EU counterparties, the FCA said that under the temporary transitional power, UK investment firms that did not have a reporting obligation for a transaction conducted with an EU27 investment firm before Brexit, will not be required to report these transactions to a UK APA for a period of 15 months post-Brexit.
It explained: “EU27 investment firms with a branch in the UK that has entered the UK temporary permissions regime may fulfil their UK trade reporting obligations by continuing to make transactions public through an EU APA, where they are obliged to do so.”
Regarding trading obligation for derivatives, the FCA stated its approach to the trading obligation for derivatives is set out in the onshored MiFID and the associated binding technical standards.
The FCA clarified that investment firms will need to conclude transactions in certain derivatives only on regulated markets, multilateral trading facilities or organised trading facilities established in the UK or on third-country venues in jurisdictions for which the UK has adopted an equivalence decision.
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