The UK's Financial Conduct Authority (FCA) granted a transitional period to ICE Futures Europe and the London Metal Exchange (LME), while German regulator BaFin approved a similar application from Eurex Clearing AG. All three companies will have until 3 July 2020 to comply with new rules on open access requirements in relation to exchange-traded derivatives set out in the Markets in Financial Instruments Regulation (MiFIR).
In force from 3 January 2018, MiFIR and the related recast Markets in Financial Instruments Directive (MiFID II) revise and update the rules applicable to investment services across the European Economic Area (EEA). The revised regime is designed to take into account developments in the trading environment since the original directive came into force in November 2007, and also aims to strengthen investor protection and increase market resilience.
The revised rules apply to a broader range of financial instruments, trading venues and techniques, notably the use of algorithmic high-frequency trading. These range from global investment banks trading complex securities to fund managers, stockbrokers and independent high street financial advisers providing advice to the general public. They apply not only to financial instruments admitted to trading on regulated markets, but also to those traded on multilateral trading facilities (MTFs) and organised trading facilities (OTFs).
MiFIR and MiFID II introduce new and extended transparency requirements to trades, including extensive reporting and taping requirements. New rules on research and inducements will prevent firms from charging 'bundled' rates for research and execution services. The new regime also imposes new product governance requirements on the manufacturers and distributers of the financial instruments, or 'products', that it covers, and introduces a harmonised commodity derivative position limits regime.
The two trading venues ICE Futures Europe and the LME will not have to consider open access requests in respect of exchange-traded derivatives until the transitional period ends on 3 July 2020. In a statement, the FCA said that it had "taken into account the risks resulting from the application of the access rights ... to the orderly functioning of the trading venues" when granting the applications.
"These moves are sensible and recognise that the markets and firms are not ready for MiFID II implementation despite best efforts by many," said financial regulation expert Elizabeth Budd of Pinsent Masons, the law firm behind Out-Law.com.