FCA Sounds Warning on Trading Platform Perimeters

FCA Sounds Warning on Trading Platform Perimeters (https://lnkd.in/e-7z-zgR)

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The FCA has followed up on last year’s FCA Guidance on the trading venue perimeter (https://lnkd.in/emfd8x_P) with a Dear CEO letter (https://lnkd.in/eCF_GQsR) covering their Trading Venue strategy for the next 2 years. Key to this is firms ensuring they have the correct regulatory permissions to maintain a level playing field.

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The 2023 guidance emphasised that a system can be multilateral and require to be a venue when “at the point of entry to the system, an order interacts, or has the potential to interact, with the trading interest of multiple other participants”. Additionally, for firms that are providing services that bring about transactions, but are not Trading Venues there is still an authorisation assessment to be made, “…. a firm involved in activities related to the trading of financial instruments, including the provision of technology designed to support trading, would still need to consider how its arrangements relate to the RAO, in particular, the activities in Article 25 of the RAO.”These two points on their own question activities by firms that the Dear CEO letter is reminding firms need to be assessed.

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The key questions for firms involved in supporting trading activity:

- Does the service fall within the Trading Venue perimeter (MTF or OTF)?

- If not, does the service fall within arranging permissions (25(1) and 25(2) of RAO)?

- If a firm has an MTF or OTF permission, have any financial instruments that are trading off venue been assessed?

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Additionally, trading firms using firms’ services need to assess the permissions of these intermediary firms for themselves and be satisfied they are trading over technology that has the correct permissions.

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OTCX strongly supports the level playing field and the ability of trading venues to support resilience, orderliness and innovation. 2025 will be an interesting year now there is momentum and firms start to take action to ensure the assess and act on regulatory permissions that are in place.