Schedule 2: Transitional amendments Part 1 – Amendments to the Markets in Financial Instruments Regulation Paragraphs 10 to 12: Systematic internalisers (pre-trade transparency requirements for fixed income instruments and derivatives etc)
Paragraphs 10 and 11 of the Schedule substitute Articles 18 and 21 (Obligation for systematic internalisers to make public firm quotes in respect of bonds, structured finance products, emission allowances and derivatives; Post-trade disclosure by investment firms, including systematic internalisers, in respect of bonds, structured finance products, emission allowances and derivatives) of MiFIR, and introduce two new articles. Further to this, paragraph 12 of the Schedule makes a consequential amendment to Article 22.
	Paragraph 1 of new Article 18 gives the FCA a power to make rules imposing pre-trade transparency requirements on systematic internalisers where the FCA determines relevant non-equity instruments should attract such requirements. The purpose of imposing requirements must be to aid price formation and allow for the fair evaluation of financial assets.
	Paragraph 2 of Article 18 limits this rule-making power to circumstances where the FCA considers its use is necessary or expedient for advancing at least one of the FCA’s operational objectives as set out in section 1B(3) of FSMA 2000.
	Paragraph 3 of Article 18 requires the FCA to consider the impact on market liquidity when using the power to set pre-trade transparency requirements on systematic internalisers. This is to avoid the efficient functioning of markets being negatively impacted through reduced liquidity.
	Paragraph 4 of Article 18 provides examples of the sorts of requirements the FCA could impose using this power.
	Paragraph 5 of Article 18 provides that when making rules to set pre-trade transparency requirements for systematic internalisers, the FCA can set provisions for quotes issued by systematic internalisers to be updated or withdrawn.
	Paragraph 6 of Article 18 makes provision about the instruments that are in scope of this power.
	Paragraph 1 of Article 18a gives the FCA the power to make provision for waivers of any of the pre-trade transparency requirements it imposes using the rule-making power in Article 18.
	Paragraph 2 of Article 18a gives the FCA the power to decide what, if any, conditions should be applied to any waiver.
	Paragraph 3 of Article 18a gives the FCA the ability to withdraw a waiver from a systematic internaliser if the systematic internaliser is using it in a way that deviates from its original purpose or to avoid complying with regulation. The FCA must give the relevant systematic internaliser a notice to withdraw the waiver.
	Paragraph 4 of Article 18a gives the FCA the ability to suspend pre-trade transparency requirements for an instrument or class of instruments. The power is exercisable by notice.
	Paragraph 5 of Article 18a obliges the FCA to include certain things in such notices and also imposes requirements about the manner of their publication.
	Paragraph 6 of Article 18a limits the FCA’s power to suspend pre-trade transparency requirements to instances where it considers that it is necessary to do so to advance its integrity objective, as set out in section 1D of FSMA 2000.
	Paragraph 7 of Article 18a specifies that when suspending pre-trade transparency requirements, the FCA should also have regard to its consumer protection objective and competition objective, as set out in sections 1C and 1E of FSMA 2000 respectively.
	Article 18b is inserted to complement the amendment to the ‘systematic internaliser’ definition in paragraph 8 of the Schedule. It requires investment firms who meet the definition of ‘systematic internaliser’ to notify the FCA, and the FCA to keep a list of all systematic internalisers for which it has received notification.
	Paragraph 1 of new Article 21 requires the FCA to make rules imposing post-trade transparency requirements on investment firms, including systematic internalisers, where the FCA determines that relevant non-equity instruments should attract such requirements. The purpose of imposing requirements must be to aid price formation and allow for the fair evaluation of financial assets.
	Paragraph 2 of Article 21 limits the rule-making power outlined in paragraph (1) to circumstances where its use is either necessary, or expedient, in advancing at least one of the FCA’s operational objectives as set out in section 1B(3) of FSMA 2000.
	Paragraph 3 of Article 21 requires the FCA to consider the impact on market liquidity when setting post-trade transparency requirements for investment firms, including systematic internalisers, using the power conferred by paragraph 1. This is to avoid the efficient functioning of markets being negatively impacted through reduced liquidity.
	Paragraph 4 of Article 21 provides examples of the sorts of requirements the FCA could impose in relation to transparency using this power.
	Paragraph 5 of Article 21 clarifies that when making rules about post-trade transparency requirements for investment firms, including systematic internalisers, using the powers in paragraph 1 the FCA can prescribe who should report a trade, when both parties to the trade are subject to post-trade transparency requirements.
	Paragraph 6 of Article 21 explains that the FCA can grant deferrals for investment firms, including systematic internalisers, who are subject to the post-trade transparency requirements that the FCA imposes through the rule-making power in paragraph 1.
	Paragraph 7 of Article 21 states that the FCA can impose any conditions it deems appropriate when granting a deferral.
	Paragraph 8 of Article 21 gives the FCA the ability to suspend any transparency requirement the FCA imposes using the rule-making power in paragraph 1 for an instrument or class of instruments. The power is exercisable by notice.
	Paragraph 9 of Article 21 obliges the FCA to include certain things in such notices and imposes requirements about the manner of their publication.
	Paragraph 10 of Article 21 limits the FCA’s power to suspend post-trade requirements for systematic internalisers and investment firms to instances where it considers that it is necessary to do so to advance its integrity objective, as set out in section 1D of FSMA 2000.
	Paragraph 11 of Article 21 provides that when suspending post-trade transparency requirements for investment firms, including systematic internalisers, the FCA must also have regard to its consumer protection objective and competition objective, as set out in sections 1C and 1E of FSMA 2000 respectively.
	Paragraph 12 of Article 21 makes provision about the instruments and persons that are in scope of the FCA’s rule-making power.