On October 27, 2016, the PRA published its final rules for transposing passporting and algorithmic trading aspects of the Markets in Financial Instruments legislative package, which comprises MiFID and MiFIR, collectively known as MiFID II. The PRA also published its responses to the feedback it received on its proposed rules which were included in the consultation paper published on March 24, 2016.
Under MiFID II, the scope of the passporting regime has been extended to include the operation of an organized trading facility (a new type of trading venue for non-equity instruments) and emissions allowances. The PRA did not receive any responses to its proposed rules on passporting although it has made some minor amendments and added a definition of 'tied agent'. The PRA's new rules will require firms that intend to extend their passports to these additional activities or investment types to notify the PRA. Existing passports will remain valid and unchanged. The PRA will use the new EU notification forms developed by ESMA and the current declaration for passport notifications under the CRD will be extended to passport notifications made under MiFID II. For firms that want to passport their MiFID activities under their CRD passport, the PRA will continue using the EBA's forms.
MiFID II also introduces new rules on algorithmic trading. The PRA is transposing the prudential requirements relating to algorithmic trading in a new part of the PRA Rulebook on Algorithmic Trading. Responses to the PRA's proposed rules related to the scope of the rules, the record-keeping requirements and the provision of direct electronic access. The PRA is not amending the scope of its rules on algorithmic trading which will apply to any relevant trading activity undertaken by regulated firms on markets outside the EEA that would have been in scope of the rules had it been located within the EEA. The PRA has decided that it will not impose any record-keeping requirements on firms in relation to their high frequency algorithmic trading activity because it does not consider it necessary to have PRA rules as well as corresponding FCA rules. The PRA is maintaining the requirement for record-keeping in relation to testing a firm's systems. However, the systems record-keeping obligations now require greater detail as to the methodological aspects of tests performed and then results and reactions to tests.
The PRA's Policy Statement is available at: http://www.bankofengland.co.uk/pra/Documents/publications/ps/2016/ps2916.pdf,
the PRA's final passporting rules are available at: http://www.bankofengland.co.uk/pra/Documents/publications/ps/2016/ps2916app1.pdf
and the PRA's final algorithmic trading rules are available at: http://www.bankofengland.co.uk/pra/Documents/publications/ps/2016/ps2916app2.pdf.
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