Legislation – Financial Services and Markets Act 2023

“Article 4Waivers for equity instruments

1.

The FCA may by rules provide for the obligation for market operators and investment firms operating a trading venue to make public the information referred to in Article 3(1) to be waived in such cases as the rules may specify.

2.

The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA.

3.

Rules under paragraph 1 may impose whatever conditions on the application of the waiver the FCA considers appropriate.

4.

The FCA must monitor the application of waivers conferred by rules under paragraph 1 (in particular the effect of such waivers on price formation and compliance with any conditions imposed under paragraph 3).

5.

The FCA may by notice given to a market operator, or an investment firm operating a trading venue, withdraw a waiver granted by rules made under this Article if the FCA considers that the waiver is being used—

(a)

in a way that deviates from its original purpose, or

(b)

to avoid requirements imposed by the rules.”

“Article 4aSuspension of waivers

1.

The FCA may direct that a waiver provided for by Article 4 is suspended (whether entirely or to such an extent as may be specified in the direction) if it considers that continued use of the waiver would unduly harm price formation.

2.

The suspension of a waiver by virtue of a direction under paragraph 1 may not have effect for a period longer than six months, but this does not prevent the giving of a further direction under that paragraph by which the suspension is renewed for a period no longer than six months.

3.

The FCA may give a direction under paragraph 1 only if it considers that the direction is necessary to advance the FCA’s integrity objective under section 1D of FSMA.

4.

In deciding whether to give a direction under paragraph 1 to suspend (or renew the suspension of) a waiver the FCA must have regard to—

(a)

its consumer protection objective under section 1C of FSMA and its competition objective under section 1E of FSMA,

(b)

relevant information produced under Article 3, or under equivalent pre-trading transparency requirements in other jurisdictions, about the use of the waiver in the United Kingdom, or under equivalent waiver arrangements in any other country, in relation to the financial instrument concerned, and

(c)

any other relevant information available in relation to trading volumes in the financial instrument concerned, whether in the United Kingdom or elsewhere.

5.

The FCA must consult the Treasury before giving a direction under paragraph 1.

6.

The requirement to consult under paragraph 5 does not apply if the FCA considers it necessary by reason of urgency to give the direction before such consultation can be carried out in order to protect—

(a)

the transparency of the price formation process, or

(b)

the interests of consumers (within the meaning of section 1G of FSMA).”

“Article 18Systematic internalisers: pre-trade transparency requirements for fixed income instruments and derivatives etc

1.

The FCA may by rules impose pre-trade transparency requirements on systematic internalisers in respect of the trading of such relevant instruments as the FCA determines should be subject to the requirements for the purposes of furthering—

(a)

efficient price formation, and

(b)

the fair evaluation of financial assets.

2.

The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purposes of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA.

3.

In making rules under paragraph 1 the FCA must (in particular) have regard to the impact that requirements imposed by the rules will have on market liquidity.

4.

The reference in paragraph 1 to “pre-trade transparency requirements” is a reference to whatever kinds of requirements relating to transparency before trading that the rules may specify, for example—

(a)

requirements to make public matters specified in the rules in respect of the trading of relevant instruments (for example, quotes);

(b)

requirements about the means by which, and the times at which, such matters are to be made public or otherwise disclosed;

(c)

requirements relating to the determination of quotes in relation to relevant instruments;

(d)

requirements in relation to the entering of transactions on the basis of such quotes.

5.

Rules under paragraph 1 may include provision for quotes issued by systematic internalisers to be updated or withdrawn in such cases as the rules may determine.

6.

In this Article and in Article 18a “relevant instruments” means bonds, structured finance products, emission allowances, derivatives and instruments included within package orders.

Article 18aArticle 18: waivers and suspensions for fixed income instruments and derivatives etc

1.

Rules under Article 18 may include provision for any requirements imposed by those rules to be waived in such cases, and to such extent, as may be determined by or under the rules.

2.

Rules that include provision under paragraph 1 may impose whatever conditions on the application of a waiver as the FCA considers appropriate.

3.

The FCA may by notice given to a systematic internaliser withdraw a waiver granted by virtue of paragraph 1 if the FCA considers that the waiver is being used—

(a)

in a way that deviates from its original purpose, or

(b)

to avoid requirements imposed by the rules.

4.

The FCA may by notice suspend requirements imposed by rules under Article 18 in the case of such relevant instruments, or class of relevant instruments, as may be specified in the notice.

5.

A notice under paragraph 4 suspending requirements—

(a)

may be given subject to conditions;

(b)

must specify the period for which the suspension has effect;

(c)

must be published in the manner appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it;

(d)

may be varied or withdrawn by the giving of a further notice (and sub-paragraph (c) applies to any such notice).

6.

The power under paragraph 4 to suspend requirements is exercisable only if the FCA considers that it is necessary to do so to advance the FCA’s integrity objective under section 1D of FSMA.

7.

In deciding whether to exercise the power under paragraph 4 to suspend requirements the FCA must also have regard to—

(a)

its consumer protection objective under section 1C of FSMA, and

(b)

its competition objective under section 1E of FSMA.

Article 18bNotification and publication requirements

1.

Firms meeting the definition of systematic internaliser must notify the FCA of that fact in accordance with rules made by the FCA.

2.

The FCA must publish, and keep up to date, a list of the systematic internalisers for which it has received notification under paragraph 1.”

“Article 21Investment firms (including systematic internalisers): post-trade transparency requirements for fixed income instruments and derivatives etc

1.

The FCA must by rules impose post-trade transparency requirements on relevant persons in respect of the trading of such relevant instruments as the FCA determines should be subject to the requirements for the purposes of furthering—

(a)

efficient price formation, and

(b)

the fair evaluation of financial assets.

2.

The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA.

3.

In making rules under paragraph 1 the FCA must (in particular) have regard to the impact that requirements imposed by the rules will have on market liquidity.

4.

The reference in paragraph 1 to “post-trade transparency requirements” is a reference to whatever kinds of requirements relating to transparency after the conclusion of trades that the rules may specify, for example—

(a)

requirements to make public matters specified in the rules in respect of the trading of relevant instruments (including the price, volume and time of transactions);

(b)

requirements about the means by which, and the times at which, such matters are to be made public.

5.

Rules under paragraph 1 may—

(a)

provide for the criteria by which the determination referred to in that paragraph is to be made;

(b)

in cases where both parties to a transaction are relevant persons, provide for which of those parties is to comply with the requirements imposed by the rules.

6.

Rules under paragraph 1 may include provision authorising relevant persons to defer complying with requirements imposed by the rules in such cases and to such extent as the rules may specify.

7.

Rules made by virtue of paragraph 6 may impose whatever conditions on the application of a deferral as the FCA considers appropriate.

8.

The FCA may by notice suspend requirements imposed by rules under paragraph 1 in the case of such relevant instruments, or class of relevant instruments, as may be specified in the notice.

9.

A notice under paragraph 8 suspending requirements—

(a)

may be given subject to conditions;

(b)

must specify the period for which the suspension has effect;

(c)

must be published in the manner appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it;

(d)

may be varied or withdrawn by the giving of a further notice (and sub-paragraph (c) applies to any such notice).

10.

The power under paragraph 8 to suspend requirements is exercisable only if the FCA considers that it is necessary to do so to advance the FCA’s integrity objective under section 1D of FSMA.

11.

In deciding whether to exercise the power under paragraph 8 to suspend requirements the FCA must also have regard to—

(a)

its consumer protection objective under section 1C of FSMA, and

(b)

its competition objective under section 1E of FSMA.

12.

In this Article—

“relevant instruments” means bonds, structured finance products, emission allowances, derivatives and instruments included within package transactions;

“relevant persons” means investment firms which, either on own account or on behalf of clients, conclude transactions in relevant instruments.”

“Article 28aSuspension or modification of Article 28

1.

The FCA may direct that the trading obligation imposed by Article 28(1) and (2) (the “DTO”) is suspended or modified in accordance with the direction if it considers that the suspension or modification—

(a)

is necessary for the purpose of preventing or mitigating disruption to financial markets, and

(b)

advances one or more of the FCA’s operational objectives referred to in section 1B(3) of FSMA.

2.

A direction under this Article may provide for the DTO to be suspended or modified—

(a)

in the case of all persons to whom the DTO applies or only to such persons or descriptions of persons as are specified in the direction;

(b)

in the case of all derivatives to which the DTO applies or only to such derivatives, or classes of derivatives, as are specified in the direction;

(c)

by reference to the venues on which derivative transactions are concluded under the DTO;

(d)

subject to conditions.

3.

In giving a direction under this Article the FCA must have regard to its competitiveness and growth objective in section 1EB of FSMA.

4.

Before giving a direction under this Article the FCA must consult—

(a)

the Bank of England, and

(b)

the PRA, if the PRA has an interest in the proposed direction.

The PRA has an interest in a proposed direction if the direction—

(a)

might affect the PRA’s discharge of its functions conferred by or under FSMA or any other enactment, or

(b)

would apply to a PRA-authorised person or to a person connected with a PRA-authorised person (and for this purpose “PRA authorised person” has the same meaning as in FSMA and “connected” is to be read in accordance with section 165(11) of FSMA).

5.

A direction under this Article may be given only with the consent of the Treasury.

The Treasury must notify the FCA in writing whether or not consent is given before the end of four weeks beginning with the day on which the proposed direction is submitted to the Treasury for consent (and if the notice is not given before the end of that period the Treasury are deemed to have consented).

6.

Where the FCA gives a direction under this Article it must also prepare a statement setting out—

(a)

an explanation of the purpose of the direction, including (where relevant) the ways in which the direction will further the purpose mentioned in paragraph 1(a) and advance one or more of the objectives mentioned in paragraph 1(b), and

(b)

such guidance in connection with the direction that the FCA considers appropriate.

7.

The FCA must publish a direction given under this Article together with the statement mentioned in paragraph 6.

8.

The Treasury must lay before Parliament a copy of a direction given under this Article and the statement mentioned in paragraph 6.

9.

If a direction under this Article has effect for a period lasting longer than 6 months, the FCA must publish, as soon as reasonably practicable after the end of each applicable 6 month period, a statement with an explanation as to why the conditions in paragraph 1(a) and (b) continue to be met.

The reference to each “applicable 6 month period” is to—

(a)

the period of 6 months beginning with the day on which the direction is given, and

(b)

each subsequent 6 month period during which the direction continues in effect.

10.

Publication under paragraph 7 or 9 is to be in whatever way appears to the FCA to be best calculated to bring the publication to the attention of the public.

11.

A direction under this Article may be varied or revoked by the giving of a further direction under this Article.

12.

For the purposes of this Article—

(a)

the variation of a direction by virtue of paragraph 11 is not to be treated as the giving of a new direction for the purposes of paragraph 9;

(b)

paragraphs 6(b) and 9 do not apply to the revocation of a direction by virtue of paragraph 11.

13.

The functions of the FCA under this Article are not “relevant functions” for the purposes of section 84 of the Financial Services Act 2012 (arrangements for the investigation of complaints relating to exercise of relevant functions of regulators).”

“Article 31Risk reduction services

1.

The FCA may by rules provide for one or more relevant obligations not to apply—

(a)

in relation to activities or transactions of a specified description carried out as part of a risk reduction service, or

(b)

to persons of a specified description in the provision of such services.

2.

The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA.

3.

The risk reduction services to which the rules relate may only be post-trade services that do not give rise to any transactions that contribute to the price discovery process.

4.

The rules—

(a)

may describe the risk reduction services to which they relate in whatever way the FCA considers appropriate (subject to paragraph 3);

(b)

may provide for whatever conditions or exceptions the FCA considers appropriate.

5.

Before making rules under paragraph 1 the FCA must consult the Bank of England.

6.

In this Article—

“relevant obligation” means—

(a)

the best execution obligation in section 11.2A of the Conduct of Business sourcebook;

(b)

the obligation in rule 5AA.1.1 in the Market Conduct sourcebook;

(c)

the trading obligation imposed by Article 28 of this Regulation;

“risk reduction service” means a service provided to two or more counterparties to derivatives transactions for the purpose of reducing non-market risks in derivatives portfolios (including, for example, portfolio compression);

“specified” means specified in the rules.”