CP21/35: Quarterly Consultation Paper No. 34

Quarterly Consultation No 34 Consultation Paper CP21/35 December 2021

2 CP21/35 Financial Conduct Authority Quarterly Consultation How to respond Moving around this document Use your browser’s bookmarks and tools to navigate. To search on a PC use Ctrl+F or Command+F on MACs. The Financial Conduct Authority invites comments on this Consultation Paper. Comments should reach us by 10 January 2022 for Chapter 2, 3, 5 and 6, and 17 January 2022 for Chapter 4. Comments may be sent by electronic submission using the form on the FCA’s website at (www.fca.org.uk/cp21-35-response-form). Alternatively, please send comments in writing to: Alternatively, please send comments in writing to: Chapter 2: Rachel Bardiger, Enforcement Law and Policy Telephone: 020 7066 1928 Chapter 3: Amaka Okonkwo, Market Data Infrastructure Supervision Telephone: 020 7066 1800 Chapter 4: Jean Obray, Markets Reporting Team Telephone: 020 7066 8592 Chapter 5: Richard Harrison, Waivers Team Telephone: 020 7066 9108 Chapter 6: Perkins Abaje, Handbook Team Telephone: 020 7066 4331 If you are responding in writing to several chapters please send your comments to Meghan Beller in the Handbook Team, who will pass your responses on as appropriate All responses should be sent to: Financial Conduct Authority, Telephone: 020 7066 2111 12 Endeavour Square, London, E20 1JN Email: cp21-35@fca.org.uk Sign up for our news and publications alerts See all our latest press releases, consultations and speeches.

3 CP21/35 Chapter 1 Financial Conduct Authority Quarterly Consultation Contents 1 Overview 4 2 EU Exit Passport Regulations: Proposed changes to EG 5 3 Amendments to MAR 9 8 4 Changes to Securities Financing Transactions – RTS 22 11 5 Changes to SUP 8 15 6 EU withdrawal-related amendments to FCA forms 17 Appendix 1 Abbreviations used in this paper Appendix 2 EU Exit Passport Regulations : Proposed changes to EG Appendix 3 Amendments to MAR 9 Appendix 4 Changes to Securities Financing Transactions – RTS 22 Appendix 5 Changes to SUP 8

4 CP21/35 Chapter 1 Financial Conduct Authority Quarterly Consultation 1 Overview Chapter No Proposed changes to Handbook Consultation Closing Period 2 Minor amendment to the Enforcement Guide to reflect the EU Exit Passport Regulations 5 weeks 3 Amendments to MAR 9 to include wind-down guidance when a data reporting services provider wishes to cancel its data reporting service authorisation 5 weeks 4 Changes to RTS 22 as onshored to remove the requirement to report certain Securities Financing Transactions (SFTs) under UK MiFIR 6 weeks 5 Consequential changes to SUP 8 to align with the revised procedure for making decisions on Waiver applications 5 weeks 6 Amendments to FCA forms in line with our interpretative guide on completing our forms after the UK’s withdrawal from the EU 5 weeks

5 CP21/35 Chapter 2 Financial Conduct Authority Quarterly Consultation 2 EU Exit Passport Regulations: Proposed changes to EG Introduction 2.1 The temporary permissions regime (TPR) enables relevant firms and funds that were passporting into the UK when the transition period ended to continue operating temporarily. During this limited time, firms must seek full authorisation from us, if required, to continue to access the UK market. 2.2 Alongside the TPR, the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 (the EU Exit Passport Regulations), created the financial services contracts regime (FSCR). 2.3 The FSCR was created solely to allow certain European Economic Area (EEA) firms and funds to run off existing UK contracts and conduct an orderly exit from the UK market. Firms within this regime will not be able to write new UK business. 2.4 The FSCR is made up of two separate regimes, Contractual Run-off and Supervised Run-off (SRO). This consultation paper concerns SRO only, which is relevant to an EEA passporting firm (or a Treaty firm) that has a UK branch or a UK top-up permission. 2.5 The EU Exit Passport Regulations contain certain conditions that must be met for a firm to enter SRO. Where the conditions are met, there are a number of scenarios in which a firm may enter SRO, for example: • where a firm has not notified to go into the TPR, and it requires permission to carry out its contracts. Where these conditions are met SRO arises automatically; • where it has notified for TPR, it applies for permission and we decide that this should be varied, to cancel or refuse; • where it notifies for TPR but does not apply for permission and applies to cancel TPR wanting SRO to apply to enable it to wind down. 2.6 The scope of an SRO firm’s permission is limited to the extent that permission is required for the performance of an existing contract or to transfer rights under an existing contract. 2.7 Whilst the SRO is intended to enable an orderly wind down of existing contracts, the EU Exit Passport Regulations contain a power for us to direct that SRO doesn’t apply to a particular firm. 2.8 The power applies to persons with deemed permission under the EU Exit Passport Regulations. It does not apply to persons with deemed permission under the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018.

6 CP21/35 Chapter 2 Financial Conduct Authority Quarterly Consultation 2.9 The effect of the power would be to remove the limited deemed permission of a firm. If we exercise the power a firm will no longer have deemed permission to wind down its existing regulated activities in the UK. 2.10 We are now consulting on changes to the Enforcement Guide (EG) relating to this power. Summary of proposals 2.11 We propose amending EG to explain this power. The changes will provide information about when we are generally likely to consider using the power and who the decision maker will be. Q2.1: Do you agree with our proposed changes to EG? Cost benefit analysis 2.12 The proposal set out in this consultation paper does not impose additional obligations on firms. It is not related to rule changes or guidance on rules. Under section 138I of the Financial Services and Markets Act 2000 (FSMA), when we wish to introduce any new rules, we must publish a cost benefit analysis along with the proposed rules. Since the requirements under section 138I are not applicable, we are not required to carry out a cost benefit analysis. In any event, we do not expect that the proposal to amend EG will lead to any increase in costs, or the cost increase will be of minimal significance. Compatibility statement 2.13 Section 1B of FSMA requires us, when discharging our general functions, as far as is reasonably possible, to act in a way that is compatible with our strategic objective and advance one or more of our operational objectives. We also need to, so far as is compatible with acting in a way that advances the consumer protection objective or the integrity objective, carry out our general functions in a way that promotes effective competition in the interests of consumers. Our general functions include our functions in relation to the giving of general advice. In discharging our general functions, we must have regard to the regulatory principles in section 3B of FSMA. We are satisfied that the proposed changes are compatible with our objectives and regulatory principles. Equality and diversity 2.14 We have considered the equality and diversity issues that may arise from the proposed amendments. We do not think that the proposals in this chapter adversely impact any of the groups with protected characteristics under the Equality Act 2010 (i.e. age, disability, sex, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sexual orientation and gender reassignment).

7 CP21/35 Chapter 2 Financial Conduct Authority Quarterly Consultation 2.15 We will continue to consider the equality and diversity implications of the proposals during the consultation period and will revisit them when publishing the final amendments. In the meantime, we welcome comments on any equality and diversity considerations respondents believe may arise.

8 CP21/35 Chapter 3 Financial Conduct Authority Quarterly Consultation 3 Amendments to MAR 9 Introduction 3.1 The Markets in Financial Instruments Directive II (MiFID II) introduced a new authorisation and supervision regime for Data Reporting Services Providers (DRSPs). There are 3 types of DRSPs: • Approved Reporting Mechanisms (ARMs): provide the service of reporting transaction details to competent authorities on behalf of investment firms; • Approved Publication Arrangements (APAs): provide the service of publishing post trade reports on behalf of investment firms; and • Consolidated Tape Providers (CTPs): collect trade reports for financial instruments from trading venues and APAs. They consolidate the trade reports into a continuous electronic live data stream, providing price and volume data per financial instrument. 3.2 The UK authorisation and supervision regulatory framework for DRSPs is a combination of the Data Reporting Services Regulations 2017 (SI 2017/699) (the DRS Regulations 2017), Chapter 9 in the FCA’s Market Conduct sourcebook (MAR), UK Markets in Financial Instruments Regulation (UK MiFIR) and several UK technical standards. 3.3 These requirements aim to improve transparency in financial markets, promote reliable price formation, and enable the FCA to receive complete and accurate transaction report data used to detect and investigate suspected market abuse. 3.4 The current regulatory framework does not include guidance on the wind-down of a DRSP. This chapter proposes to amend MAR 9 to include guidance for a DRSP that wishes to cancel its data reporting services authorisation. 3.5 This chapter will be of interest to a person or firm authorised (or verified) to operate a data reporting service in the UK. Summary of proposals 3.6 DRSPs provide important services to enable investment firms to comply with their regulatory reporting obligations, as well as to promote market transparency and integrity. If a DRSP wishes to wind-down its data reporting services, it is important that this is done in an orderly manner. 3.7 We propose to amend MAR 9 to include wind-down guidance for DRSPs that sets out: • how a DRSP should engage with the FCA for the duration of the cancellation process;

9 CP21/35 Chapter 3 Financial Conduct Authority Quarterly Consultation • the requirement for a wind-down plan which promotes and protects the integrity of financial markets and the interests of the DRSP’s clients; and • a DRSP’s obligations until the conclusion of the cancellation process. 3.8 Setting out our expectations for an orderly wind-down of a DRSP in MAR 9 will ensure that there is a clear framework for a DRSP to follow should it wish to cancel its data reporting services authorisation under Regulation 11 of the DRS Regulations 2017. This should mitigate the impact of a DRSP exiting the market on clients and the wider financial service industry. 3.9 We have set out our proposed amendment to MAR 9 to incorporate provisions relating to the wind-down of a DRSP in Appendix 3. In conjunction with the draft MAR 9 instrument, we have also set out our proposed updated MAR 9 Annex 4 cancellation form in Appendix 3, which includes a requirement to provide a wind-down plan. Q3.1: Do you agree with our approach to include wind-down guidance for DRSPs in MAR 9? If not, please explain your rationale. Q3.2: Do you have any comments on the wind-down provisions set out in our draft MAR 9 instrument in Appendix 3? Q3.3: Do you have any comments on our proposed updated MAR 9 Annex 4 cancellation form? Cost benefit analysis 3.10 Our statutory cost benefit analysis (CBA) requirements in Section 138I of the Financial Services and Markets Act 2000 (FSMA) do not apply to directions and guidance issued under Regulation 11 and 20 of the DRS Regulations 2017. 3.11 The proposed guidance seeks to support existing legislation, rules and supervisory practice underpinning the regulation of UK DRSPs. We consider that the expectations set out in this document are reasonably predictable from the relevant legislation and rules. Compatibility statement 3.12 We are satisfied that the proposed guidance is compatible with our objectives and regulatory principles. The amendment advances our operational objective of promoting market integrity under section 1B(3) FSMA and regulation 17 of the DRS Regulations 2017. Equality and diversity 3.13 We have considered the equality and diversity issues that may arise from the proposed amendments. We do not think that the proposals in this chapter adversely impact

10 CP21/35 Chapter 3 Financial Conduct Authority Quarterly Consultation any of the groups with protected characteristics under the Equality Act 2010 (i.e. age, disability, sex, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sexual orientation and gender reassignment). 3.14 We will continue to consider the equality and diversity implications of the proposals during the consultation period and will revisit them when publishing the final rules. In the meantime, we welcome comments on any equality and diversity considerations respondents believe may arise.

11 CP21/35 Chapter 4 Financial Conduct Authority Quarterly Consultation 4 Changes to Securities Financing Transactions – RTS 22 Introduction 4.1 We are proposing changes to the reporting of securities financing transactions (SFTs) under the UK Markets in Financial Instruments Regulation (UK MiFIR). Our aim is to reduce the reporting burden on firms by having these transactions reported under one regime (UK SFTR) only. 4.2 Our proposals will impact investment firms that have transaction reporting obligations and that carry out SFTs with a counterparty of the ESCB1 or the Bank of England. They may also be of interest to firms subject to reporting requirements under UK SFTR. Summary of proposals Background 4.3 SFTs are excluded from reporting under UK MiFIR following the exclusion provided for in Article 2(5)(a) of RTS 22 as onshored. However, this exclusion does not apply to SFTs to which the counterparty is a member of the European System of Central Banks (ESCB) or Bank of England. 4.4 SFTs to which a member of the ESCB is a counterparty are also reportable under UK SFTR. However, as a result of the Temporary Transitional Power (TTP), this reporting obligation did not come into effect in January 2021. 4.5 The TTP is set to expire in March 2022. In the absence of any action, SFTs to which the counterparty is a member of the ESCB would become reportable under UK SFTR and remain reportable under UK MiFIR. Proposal 4.6 We are proposing to widen the existing exclusion of SFTs from reporting under UK MiFIR to also include SFTs where the counterparty is a member of the ESCB or Bank of England, effective from 31 March 2022. 1 In accordance with paragraph 31bazg of Annex IX (Financial Services) to the EEA Agreement, this reference to a member of the European System of Central Banks shall be understood to include, in addition to its meaning in this Regulation, a national central bank of the EFTA States. Article 2(b) of the EEA Agreement defines ‘EFTA States’ to mean Iceland, the Principality of Liechtenstein and the Kingdom of Norway.

12 CP21/35 Chapter 4 Financial Conduct Authority Quarterly Consultation 4.7 This would mean that: • No SFTs would be subject to reporting under UK MiFIR. SFTs would be reportable only under UK SFTR, including where a member of the ESCB is a counterparty. • SFTs where the counterparty is the Bank of England would not be reportable under either regime. 4.8 Our proposal aims to remove the burden on firms attached to reporting the same transaction twice under different regimes. We view the associated reporting cost on firms as disproportionate to the benefit we receive from having the same transaction reported under UK SFTR and UK MiFIR. 4.9 UK SFTR is more suited to the reporting of these transactions and we see additional benefits to having all SFTs reported under one regime. Q4.1: Do you agree with the approach to report SFTs where the counterparty is a member of the ESCB under UK SFTR only? Q4.2: Do you agree with the approach to stop reporting SFTs where the counterparty is the Bank of England? Q4.3: Do you agree with the proposed amendments to onshored RTS 22? Q4.4: Do you agree with the proposed timing for the amendment that will take effect at the end of the TTP? 4.10 The proposed draft Handbook text is shown in Appendix 4.2 Cost benefit analysis 4.11 Section 138I of the Financial Services and Markets Act 2000 (FSMA) requires us to publish a cost benefit analysis (CBA) when proposing draft rules. However, section 138L of FSMA says that we do not need to provide a CBA where we consider that there will be no increase in costs, or the increases will be of minimal significance. Having assessed the changes proposed in this chapter and having considered previous estimates of similar reporting changes, we believe this exemption applies to the proposals in this chapter. 4.12 We are proposing to remove an existing reporting obligation that exists under UK MiFIR. We anticipate that this will reduce reporting costs for firms subject to these requirements. 2 The guidance on how to report an SFT transaction in the Guidelines on transaction reporting, order and clock synchronisation would no longer be relevant as no SFT transactions would be reportable under MiFIR under any circumstances.

13 CP21/35 Chapter 4 Financial Conduct Authority Quarterly Consultation Impact on mutual societies 4.13 Section 138S(2) of FSMA requires us to prepare a statement setting out our opinion on whether proposed technical standards will have an impact on mutual societies which is significantly different from the impact on other authorised persons. 4.14 We are satisfied that the proposed amendments do not impact on mutual societies to a greater extent than on other authorised firms. Compatibility statement 4.15 When consulting on changes to technical standards, we are required by section 138S(2)(f) FSMA to explain why our proposal: i. is compatible with our strategic objective, that is ensuring that relevant markets function well; ii. advances one or more of the FCA’s operational objectives (consumer protection objective, integrity objective and competition objective); and iii. has regard to the regulatory principles in section 3B FSMA. 4.16 Our proposals are compatible with the FCA’s strategic objective of ensuring that the relevant markets function well because they ensure that firms report the appropriate type and level of information relating to securities financing transactions, thereby enabling us to discharge more effectively our supervisory obligations.  As such they advance the FCA’s operational objective of protecting and enhancing the integrity of the UK financial system and similarly help secure an appropriate degree of protection for the clients of firms subject to these reporting obligations. 4.17 We have had regard to the regulatory principles in section 3B FSMA. Not all of these regulatory principles are relevant to the proposals and we cover the most relevant of the principles below. The need to use the resources of each regulator in the most efficient and economic way 4.18 By streamlining the provision of reporting information in respect of the same transactions under different sources of retained EU law, the FCA is better able to target its supervisory resources in the most efficient and economic ways, when it comes to market monitoring. The principle that a burden or restriction should be proportionate to the benefits 4.19 The effect of our proposals is to reduce the duplication of regulatory reporting by firms subject to reporting obligations under both UK MiFIR and UK SFTR, in respect of the same transaction, thereby achieving a more proportionate outcome for firms that would be subject to dual requirements.

14 CP21/35 Chapter 4 Financial Conduct Authority Quarterly Consultation Equality and diversity 4.20 We have considered the equality and diversity issues that may arise from the proposed amendments. We do not think that the proposals in this chapter adversely impact any of the groups with protected characteristics under the Equality Act 2010 (i.e. age, disability, sex, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sexual orientation and gender reassignment). 4.21 We will continue to consider the equality and diversity implications of the proposals during the consultation period and will revisit them when publishing the final rules. In the meantime, we welcome comments on any equality and diversity considerations respondents believe may arise.

15 CP21/35 Chapter 5 Financial Conduct Authority Quarterly Consultation 5 Changes to SUP 8 Introduction 5.1 Section 138A of the Financial Services and Markets Act 2000 (FSMA) details the availability of waivers or modifications of rules in the FCA Handbook. Chapter 8 in the Supervision manual (SUP) sets out the expectations that firms should have of the FCA when assessing applications. 5.2 FCA’s Authorisation Division is restructuring its decision-making framework to further empower its staff to make decisions within an agreed framework. Summary of proposals 5.3 We are seeking to amend the guidance at SUP 8.9.1G to remove references to the oversight of a staff committee. The existing committee has now been removed from our governance structure and the change better reflects how most decisions on waivers are currently made in practice. We are not proposing to introduce a process of escalation of high profile precedent setting or other significant cases to an alternative senior committee at the FCA; those will be escalated to appropriate senior individuals (with collective decision making where appropriate) following liaison with relevant stakeholders. We consider this to provide an appropriate balance between the desirability of our being able to take decisions at greater pace with the need for proportionate levels of quality control, consistency and governance. Q5.1: Do you have any comments on the proposed changes in light of the governance changes the FCA has made? Cost benefit analysis 5.4 Section 138I of the Financial Services and Markets Act 2000 (FSMA) requires us to publish a cost benefit analysis (CBA) unless, in accordance with section 138L, we believe that there will be no increase in costs or that the increase will be of minimal significance. Section 138I also requires us to publish an estimate of costs and benefits unless these cannot be reasonably estimated or it is not reasonably practicable to estimate them. 5.5 We are satisfied that the proposed amendment does not increase costs to firms or consumers, or any increase will be of minimal significance, as they do not create any new obligations. It will have a general benefit of clarifying our guidance.

16 CP21/35 Chapter 5 Financial Conduct Authority Quarterly Consultation Compatibility statement 5.6 Section 1B of FSMA requires us, when discharging our general functions, so far as is reasonably possible, to act in a way that is compatible with our strategic objective and advances one or more of our operational objectives. 5.7 We are satisfied that the proposed guidance is compatible with our objectives and regulatory principles. Taking decisions at greater pace with proportionate levels of quality control, consistency and governance ensures that the amendment advances our operational objectives of securing an appropriate degree of protection for consumers, promoting market integrity and promoting effective competition Equality and diversity 5.8 We have considered the equality and diversity issues that may arise from the proposed amendments. We do not think that the proposals in this chapter adversely impact any of the groups with protected characteristics under the Equality Act 2010 (i.e. age, disability, sex, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sexual orientation and gender reassignment). 5.9 We will continue to consider the equality and diversity implications of the proposals during the consultation period and will revisit them when publishing the final guidance. In the meantime, we welcome comments on any equality and diversity considerations respondents believe may arise.

17 CP21/35 Chapter 6 Financial Conduct Authority Quarterly Consultation 6 EU withdrawal-related amendments to FCA forms Introduction 6.1 The FCA has amended its Handbook to take account of the UK’s withdrawal from the EU. However, in general, we have not made EU withdrawal-related amendments to any FCA forms that existed prior to the end of the transition period that followed the UK’s withdrawal. 6.2 We indicated in Consultation Paper CP18/36 that: 'we propose to not carry out a detailed line by line review of all forms to identify and resolve these provisions. Instead, we will produce a guide which sets out the approach we expect users of our Handbook forms to take after Brexit'. 6.3 We consulted on our ‘Interpretative guide on completing our forms after the UK’s withdrawal from the EU’ in Appendix 2 of that CP, issued the guide in February 2019 in Appendix 5 of PS 19/5, and updated the guide in September 2020 to take account of the EU withdrawal transition period (see FCA Handbook Notice 80). Summary of proposals 6.4 We propose to amend the remaining forms in line with the FCA’s guide, and to withdraw or remove any forms which are obsolete because of EU withdrawal.3 6.5 Having consulted on the guide, which is now in operation, we do not propose to consult further on the detail of amendments to specific forms. 6.6 Certain forms refer directly or indirectly to the concept of passporting, which is no longer relevant except for UK firms passporting into Gibraltar or Gibraltarian firms passporting into the UK in line with the transitional arrangements for Gibraltar. We do not propose to tailor all of these references to the transitional arrangements, but will instead update our website with further information on how firms passporting in and out of Gibraltar should complete FCA forms. 6.7 We expect to make the necessary changes and to implement them on systems such as RegData no later than the end of March 2022. Q6.1: Do you have any comments on our proposed approach to amending forms? 3 Please note that forms related to reporting under the Capital Requirements Regulation are being amended separately as part of the implementation of the FCA’s Investment Firms Prudential Regime (IFPR).

18 CP21/35 Chapter 6 Financial Conduct Authority Quarterly Consultation Cost benefit analysis 6.8 Section 138I of the Financial Services and Markets Act 2000 (FSMA) requires us to publish a cost benefit analysis unless, in accordance with section 138L, we believe that there will be no increase in costs or that the increase will be of minimal significance. Section 138I also requires us to publish an estimate of costs and benefits unless these cannot be reasonably estimated or it is not reasonably practicable to estimate them. 6.9 We are satisfied that the proposed amendment does not increase costs to firms or consumers, or any increase will be of minimal significance, as they do not create any new obligations. It will have a general benefit of clarifying our forms. Compatibility statement 6.10 We propose to make these changes using the delegated powers under the Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018. We consider that these changes prevent, remedy or mitigate any failure of the relevant FCA Handbook and non-Handbook forms to operate effectively, or any other deficiency in the relevant FCA Handbook and non-Handbook forms, arising from the withdrawal of the UK from the EU. 6.11 The changes proposed under these powers do not: • impose or increase taxation or fees; make retrospective provision; • create a criminal offence which is capable of leading to imprisonment of more than 2 years; • establish a public authority; • implement the Article 50 Withdrawal Agreement; • result in the transfer of a function of an EU authority to a UK authority; • confer any power to legislate by means of orders, rules, regulations or any other subordinate instrument; or • amend any legislation other than the relevant FCA Handbook and non-Handbook forms. Equality and diversity 6.12 We have considered the equality and diversity issues that may arise from the proposed amendments. We do not think that the proposals in this chapter adversely impact any of the groups with protected characteristics under the Equality Act 2010 (i.e. age, disability, sex, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sexual orientation and gender reassignment). 6.13 We will continue to consider the equality and diversity implications of the proposals during the consultation period and will revisit them when publishing the final rules. In the meantime, we welcome comments on any equality and diversity considerations respondents believe may arise.

19 CP21/35 Appendx 1 Financial Conduct Authority Quarterly Consultation Appendix 1 Abbreviations used in this paper Abbreviation Description APAs Approved Publication Arrangements ARMs Approved Reporting Mechanisms CBA Cost benefit analysis CP Consultation Paper CTPs Consolidated Tape Providers DRSPs Data Reporting Services Providers EEA firm European Economic Area firm EG The Enforcement Guide EU European Union FCA Financial Conduct Authority FSCR Financial services contracts regime FSMA Financial Services and Markets Act 2000 MAR Market Conduct sourcebook MiFID II Markets in Financial Instruments Directive II PRA Prudential Regulation Authority SFT Securities financing transactions as defined in UK SFTR SRO Supervised Run-off TPR Temporary permissions regime TTP Temporary Transitional Power UK MiFIR UK Markets in Financial Instruments Regulation UK SFTR The UK version of the Securities Financing Transactions Regulation

20 CP21/35 Appendx 1 Financial Conduct Authority Quarterly Consultation We make all responses to formal consultation available for public inspection unless the respondent requests otherwise. We will not regard a standard confidentiality statement in an email message as a request for non-disclosure. Despite this, we may be asked to disclose a confidential response under the Freedom of Information Act 2000. We may consult you if we receive such a request. Any decision we make not to disclose the response is reviewable by the Information Commissioner and the Information Rights Tribunal. All our publications are available to download from www.fca.org.uk. If you would like to receive this paper in an alternative format, please call 020 7066 7948 or email: publications_graphics@fca.org.uk or write to: Editorial and Digital team, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN Sign up for our news and publications alerts

CP21/35 Appendix 2 Financial Conduct Authority Quarterly Consultation Appendix 2 EU Exit Passport Regulations : Proposed changes to EG

FCA 2022/XX ENFORCEMENT GUIDE (EU EXIT PASSPORT REGULATIONS) INSTRUMENT 2022 Powers exercised A. The Financial Conduct Authority (“the FCA”) makes this instrument in the exercise of section 139A of the Financial Services and Markets Act 2000 (power of the FCA to give guidance). Commencement B. This instrument comes into force on [date]. Amendments to the material outside Handbook C. The Enforcement Guide (EG) is amended in accordance with the Annex to this instrument. Citation D. This instrument may be cited as the Enforcement Guide (EU Exit Passport Regulations) Instrument 2022. By order of the Board [date]

FCA 2022/XX Page 2 of 2 Annex Amendments to the Enforcement Guide (EG) Insert the following new section, EG 19.42, after EG 19.41 (Securities Financing Transactions Regulation). All of the text is new and is not underlined. 19 Non-FSMA powers … 19.42 EU Exit Passport Regulations 19.42.1 Regulations 28 and 34 of the EU Exit Passport Regulations make provision for certain qualifying persons to be treated as having Part 4A permission. The EU Exit Passport Regulations provide a supervised run-off regime - which enables such persons to run off existing UK contracts and conduct an orderly exit from the UK market. 19.42.2 The FCA has power under the EU Exit Passport Regulations to direct that the regime should not apply to a particular person. The effect of such a direction would be to remove that person’s deemed permission to conduct regulated activities in the UK. 19.42.3 The FCA may consider whether to make a direction under the EU Exit Passport Regulations where: (1) the person is failing or is likely to fail to satisfy the threshold conditions; or (2) it is desirable to exercise the power in order to advance one or more of its operational objectives. 19.42.4 When exercising this power, the FCA will do so in a manner consistent with its approach generally to enforcement and cancellation under the Act. 19.42.5 The decision making procedures used to exercise the power will be consistent with the FCA’s approach to making decisions under Executive Procedures.

CP21/35 Appendix 3 Financial Conduct Authority Quarterly Consultation Appendix 3 Amendments to MAR 9

FCA 2022/XX MARKET CONDUCT SOURCEBOOK (DATA REPORTING SERVICES CANCELLATION) INSTRUMENT 2022 Powers exercised A. The Financial Conduct Authority makes this instrument in the exercise of the powers of direction, guidance and related provisions in or under the following provisions of the Data Reporting Services Regulations 2017, (SI 2017/699): (1) regulation 11 (Cancellation of authorisation); and (2) regulation 20 (Guidance). Commencement B. This instrument comes into force on [date]. Amendments to the Handbook C. The Market Conduct sourcebook (MAR) is amended in accordance with the Annex to this instrument. Citation D. This instrument may be cited as the Market Conduct Sourcebook (Data Reporting Services Cancellation) Instrument 2022. By order of the Board [date]

FCA 2022/XX Page 2 of 3 Annex Amendments to the Market Conduct sourcebook (MAR) In this Annex, underlining indicates new text. 9 Data reporting service … 9.2 Authorisation and verification … Cancellation of authorisation form … 9.2.5A G When the data reporting services provider wishes to cancel all of its data reporting service authorisation, it should engage with the FCA as early as possible. As part of its supervisory approach set out in MAR 9.4.1G, the FCA expects to continue to have an open, cooperative and constructive relationship with the data reporting services provider for the whole duration of the cancellation process. 9.2.5B G As set out in the form at MAR 9 Annex 4D, the data reporting services provider must provide in its request for cancellation a plan which sets out how it will cease all of its data reporting services in an orderly manner (wind-down plan). The wind-down plan should promote and protect the integrity of the financial markets and the interests of the data reporting services provider’s clients. The FCA expects at the minimum the wind-down plan to: (1) set out the governance arrangements and identify a person or group within its management body to ensure the effective and prudent management, oversight and implementation of the wind-down plan; (2) set out the arrangements for the retention of key individuals of the data reporting services provider in relation to the management, oversight and implementation of the wind-down plan; (3) set out communications plans that consider the content, timing and methods of communications to stakeholders and relevant regulators (FCA, overseas regulators etc.); (4) identify clients who will be affected by the cancellation of the data reporting services provider’s authorisation and set out the arrangements to support the transfer of such clients to a new data reporting services provider; and

FCA 2022/XX Page 3 of 3 (5) demonstrate that the timings in the wind-down plan are reasonable. 9.2.5C G Where a data reporting services provider wishes to cancel all of its data reporting service authorisation, it must continue to comply with the requirements in the DRS Regulations up until its authorisation is cancelled, in particular in relation to publishing trade reports or submitting details of transactions to the FCA. The FCA expects the data reporting services provider to provide a written confirmation at the end of the cancellation process confirming compliance with the DRS Regulations. … 9 Annex 4 D Cancellation of Authorisation of a Data Reporting Services Provider (DRSP) … … …

CP21/35 Appendix 4 Financial Conduct Authority Quarterly Consultation Appendix 4 Changes to Securities Financing Transactions – RTS 22

FCA 2022/XX TECHNICAL STANDARDS (MARKETS IN FINANCIAL INSTRUMENTS) (TRANSACTION REPORTING) INSTRUMENT 2022 Powers exercised A. The Financial Conduct Authority (“the FCA”) makes this instrument in the exercise of the powers and related provisions in or under: (1) article 26(9) (Obligation to report transactions) of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012; and (2) the following sections of the Financial Services and Markets Act 2000 (“the Act”): (a) section 138P (Technical standards); (b) section 138Q (Standards instruments); (c) section 138S (Application of Chapters 1 and 2); and (d) section 137T (General supplementary powers). B. The rule-making powers listed above are specified for the purposes of section 138Q(2) (Standards instruments) of the Act. Pre-conditions to making C. The FCA has consulted the Prudential Regulation Authority and the Bank of England as appropriate in accordance with section 138P of the Act. D. A draft of this instrument has been approved by the Treasury in accordance with section 138R of the Act. Commencement E. This instrument comes into force on [date]. Interpretation F. In this instrument, any reference to any provision of direct EU legislation is a reference to it as it forms part of retained EU law. Modifications G. Commission Delegated Regulation (EU) 2017/590 of 28 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the reporting of transactions to competent authorities is amended in accordance with the Annex to this instrument.

Page 2 of 4 Citation H. This instrument may be cited as the Technical Standards (Markets in Financial Instruments) (Transaction Reporting) Instrument 2022. By order of the Board [date]

Page 3 of 4 In this instrument, striking through indicates deleted text. Annex Commission Delegated Regulation (EU) 2017/590 of 28 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the reporting of transactions to competent authorities … Article 2 Meaning of transaction … … (5) A transaction for the purposes of Article 26 of Regulation (EU) No 600/2014 shall not include the following: (a) securities financing transactions as defined in Article 3(11) of Regulation (EU) 2015/2365 of the European Parliament and of the Council; … The exclusion provided for in point (a) of the first subparagraph shall not apply to the securities financing transactions to which a member of the European System of Central Banks or Bank of England is a counterparty. … In accordance with paragraph 31bazg of Annex IX (Financial Services) to the EEA Agreement, this reference to a member of the European System of Central Banks shall be understood to include, in addition to its meaning in this Regulation, a national central bank of the EFTA States. Article 2(b) of the EEA Agreement defines ‘EFTA States’ to mean Iceland, the Principality of Liechtenstein and the Kingdom of Norway. The European Union (Withdrawal) Act 2018 provides that the Annexes to the EEA Agreement, as they have effect in EU law immediately before IP completion day, form part of UK law on and after IP completion day – to the extent that they refer to or adapt any EU

Page 4 of 4 regulation, EU decision or EU tertiary legislation which is retained by section 3 of the Act. The 2018 Act also provides that Protocol 1 to the EEA Agreement, as it has effect in EU law immediately before IP completion day, forms part of UK law on and after IP completion day. …

CP21/35 Appendix 5 Financial Conduct Authority Quarterly Consultation Appendix 5 Changes to SUP 8

FCA 2022/XX SUPERVISION MANUAL (WAIVERS GOVERNANCE PROCESS) INSTRUMENT 2022 Powers exercised A. The Financial Conduct Authority (“the FCA”) makes this instrument in the exercise of the powers and related provisions in or under: (1) the following sections of the Financial Services and Markets Act 2000 (“the Act”): (a) section 139A (Power of the FCA to give guidance); (b) section 137T (General supplementary powers); and (2) the other powers and related provisions listed in Schedule 4 (Powers exercised) to the General Provisions of the Handbook. B. The rule-making powers listed above are specified for the purpose of section 138G (Rule-making instruments) of the Act. Commencement C. This instrument comes into force on [date]. Amendments to the Handbook D. The Supervision manual (SUP) is amended in accordance with the Annex to this instrument. Citation E. This instrument may be cited as the Supervision Manual (Waivers Governance Process) Instrument 2022. By order of the Board [date]

FCA 2022/XX Page 2 of 2 Annex Amendments to the Supervision manual (SUP) In this Annex, underlining indicates new text and striking through indicates deleted text. 8 Waiver and modification of rules … 8.9 Decision making 8.9.1 G The waivers regime is overseen by a staff committee. Its dedicated team whose responsibility it is to ensure that the giving of waivers is in accordance with the requirements of the Act, of the guidance in SUP 8 and of other relevant guidance. Decisions on individual applications are generally made by individuals under arrangements designed to result in rapid, responsive and well-informed decision making in line with established precedents and policies. The arrangements also include arrangements for collective decision making to set general policies, and, as necessary, determine cases for applications with substantially common characteristics or other particular significance (for example, waivers in relation to the same rule or related rules or by firms in a similar position). It also includes arrangements for escalation of decision making by senior individuals within established precedents and policies following liaison with relevant internal stakeholders. …

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