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SCHEDULEU.K.

PART IU.K.Recognition requirements for investment exchanges

Financial resourcesU.K.

1.—(1) The exchange must have financial resources sufficient for the proper performance of its functions as a recognised investment exchange.U.K.

(2) In considering whether this requirement is satisfied, [F1the FCA] [F2must] (without prejudice to the generality of regulation 6(1)) take into account all the circumstances, including the exchange’s connection with any person, and any activity carried on by the exchange, whether or not it is an exempt activity.

Textual Amendments

Commencement Information

I1Sch. para. 1 in force at 1.12.2001, see reg. 2

SuitabilityU.K.

2.—(1) The exchange must be a fit and proper person to perform the functions of a recognised investment exchange.U.K.

(2) In considering whether this requirement is satisfied, [F1the FCA] may (without prejudice to the generality of regulation 6(1)) take into account all the circumstances, including the exchange’s connection with any person.

[F3(3) The persons who effectively direct the business and operations of the exchange must be of sufficiently good repute and sufficiently experienced to ensure the sound and prudent management and operation of the financial markets operated by it.

(4) The persons who are in a position to exercise significant influence over the management of the exchange, whether directly or indirectly, must be suitable.]

Textual Amendments

Commencement Information

I2Sch. para. 2 in force at 1.12.2001, see reg. 2

Systems and controlsU.K.

3.—(1) The exchange must ensure that the systems and controls used in the performance of its functions are adequate, and appropriate for the scale and nature of its business.U.K.

(2) Sub-paragraph (1) applies in particular to systems and controls concerning—

(a)the transmission of information;

(b)the assessment [F4, mitigation] and management of risks to the performance of the exchange’s functions;

(c)the effecting and monitoring of transactions on the exchange;

[F5(ca)the technical operation of the exchange, including contingency arrangements for disruption to its facilities;]

(d)the operation of the arrangements mentioned in paragraph 4(2)(d) below; and

(e)(where relevant) the safeguarding and administration of assets belonging to users of the exchange’s facilities.

Textual Amendments

Commencement Information

I3Sch. para. 3 in force at 1.12.2001, see reg. 2

Safeguards for investorsU.K.

4.—(1) The exchange must ensure that business conducted by means of its facilities is conducted in an orderly manner and so as to afford proper protection to investors.U.K.

(2) Without prejudice to the generality of sub-paragraph (1), the exchange must ensure that—

(a)access to the exchange’s facilities is subject to criteria designed to protect the orderly functioning of the market and the interests of investors [F6and is in accordance with paragraph 7B];

[F7(aa)it has transparent and non-discretionary rules and procedures—

(i)to provide for fair and orderly trading, and

(ii)to establish objective criteria for the efficient execution of orders;]

F8(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)appropriate arrangements are made for relevant information to be made available (whether by the exchange or, where appropriate, by issuers of the investments) to persons engaged in dealing in investments on the exchange;

(d)satisfactory arrangements [F9, which comply with paragraph 7D,] are made for securing the timely discharge (whether by performance, compromise or otherwise) of the rights and liabilities of the parties to transactions effected on the exchange (being rights and liabilities in relation to those transactions);

(e)satisfactory arrangements are made for recording transactions effected on the exchange, and transactions (whether or not effected on the exchange) which are cleared or to be cleared by means of its facilities;

[F10(ea)appropriate arrangements are made to—

(i)identify conflicts between the interests of the exchange, its owners and operators and the interests of the persons who make use of its facilities or the interests of the financial markets operated by it, and

(ii)manage such conflicts so as to avoid adverse consequences for the operation of the financial markets operated by the exchange and for the persons who make use of its facilities;]

(f)appropriate measures [F11(including the monitoring of transactions effected on the exchange)] are adopted to reduce the extent to which the exchange’s facilities can be used for a purpose connected with market abuse or financial crime, and to facilitate their detection and monitor their incidence; and

(g)where the exchange’s facilities include making provision for the safeguarding and administration of assets belonging to users of those facilities, satisfactory arrangements are made for that purpose.

(3) In sub-paragraph (2)(c), “relevant information” means information which is relevant in determining the current value of the investments.

Textual Amendments

Commencement Information

I4Sch. para. 4 in force at 1.12.2001, see reg. 2

[F12Provision of pre-trade information about share tradingU.K.

Textual Amendments

4A.—(1) The exchange must make arrangements for—U.K.

(a)current bid and offer prices for shares, and

(b)the depth of trading interest in shares at the prices which are advertised through its systems,

to be made available to the public on reasonable commercial terms and on a continuous basis during normal trading hours, subject to the requirements contained in Chapter IV of the Commission Regulation.

(2) If an exchange decides to give investment firms and credit institutions required to publish their quotes in shares—

(a)in accordance with Article 27 of the markets in financial instruments directive, or

(b)by [F1the FCA],

access to the arrangements referred to in sub-paragraph (1), it must do so on reasonable commercial terms and on a non-discriminatory basis.

(3) [F1The FCA] may waive the requirements of sub-paragraph (1) in the circumstances specified—

(a)in the case of shares to be traded on a multilateral trading facility operated by the exchange, in Article 29.2 of the markets in financial instruments directive and Chapter IV of the Commission Regulation; or

(b)in the case of shares to be traded on a regulated market operated by the exchange, in Article 44.2 of that directive and Chapter IV of the Commission Regulation.

(4) In this paragraph, “shares” means shares admitted to trading on a regulated market.

Textual Amendments

Provision of post-trade information about share tradingU.K.

4B.—(1) The exchange must make arrangements for the price, volume and time of transactions executed in shares to be made available to the public as soon as possible after the time of the transaction on reasonable commercial terms, subject to the requirements contained in Chapter IV of the Commission Regulation.U.K.

(2) If an exchange decides to give investment firms and credit institutions required to make public details of their transactions in shares—

(a)in accordance with Article 28 of the markets in financial instruments directive, or

(b)by [F1the FCA],

access to the arrangements referred to in sub-paragraph (1), it must do so on reasonable commercial terms and on a non-discriminatory basis.

(3) [F1The FCA] may permit exchanges to defer the publication required by sub-paragraph (1) in the circumstances specified, and subject to the requirements contained—

(a)in the case of shares traded on a multilateral trading facility operated by an exchange, in Article 30.2 of the markets in financial instruments directive and Chapter IV of the Commission Regulation; or

(b)in the case of shares traded on a regulated market operated by an exchange, in Article 45.2 of that directive and Chapter IV of the Commission Regulation.

(4) If [F1the FCA] permits exchanges to defer the publication required by sub-paragraph (1), those exchanges must ensure that the existence of and the terms of the permission are disclosed to users and members of their facilities and to investors.

(5) In this paragraph, “shares” means shares admitted to trading on a regulated market.]

Textual Amendments

Disclosure by issuers of securitiesU.K.

F135.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

Textual Amendments

Promotion and maintenance of standardsU.K.

6.—(1) The exchange must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on of regulated activities by persons in the course of using the facilities provided by the exchange.U.K.

(2) The exchange must be able and willing to cooperate, by the sharing of information or otherwise, with [F1the FCA], with any other authority, body or person having responsibility in the United Kingdom for the supervision or regulation of any regulated activity or other financial service, or with an overseas regulator within the meaning of section 195 of the Act.

Textual Amendments

Commencement Information

I5Sch. para. 6 in force at 1.12.2001, see reg. 2

Rules and consultationU.K.

7.—(1) The exchange must ensure that appropriate procedures are adopted for it to make rules, for keeping its rules under review and for amending them.U.K.

(2) The procedures must include procedures for consulting users of the exchange’s facilities in appropriate cases.

(3) The exchange must consult users of its facilities on any arrangements it proposes to make for dealing with penalty income in accordance with paragraph 8(3) below (or on any changes which it proposes to make to those arrangements).

Commencement Information

I6Sch. para. 7 in force at 1.12.2001, see reg. 2

[F14Admission of financial instruments to tradingU.K.

Textual Amendments

7A.—(1) The exchange must make clear and transparent rules concerning the admission of financial instruments to trading on any financial market operated by it.U.K.

(2) The rules must ensure that all financial instruments admitted to trading on a regulated market operated by the exchange are capable of being traded in a fair, orderly and efficient manner (in accordance with Chapter V of the Commission Regulation, where applicable).

(3) The rules must ensure that—

(a)all transferable securities admitted to trading on a regulated market operated by the exchange are freely negotiable (in accordance with Chapter V of the Commission Regulation, where applicable); and

(b)all contracts for derivatives admitted to trading on a regulated market operated by the exchange are designed so as to allow for their orderly pricing as well as for the existence of effective settlement conditions.

(4) The exchange must maintain arrangements to provide sufficient publicly available information (or satisfy itself that sufficient information is publicly available) to enable the users of a multilateral trading facility operated by it to form investment judgments, taking into account both the nature of the users and the types of instrument traded.

(5) The exchange must maintain effective arrangements to verify that issuers of transferable securities admitted to trading on a regulated market operated by it comply with the disclosure obligations.

(6) The exchange must maintain arrangements to assist users of a regulated market operated by it to obtain access to information made public under the disclosure obligations.

(7) The exchange must maintain arrangements regularly to review whether the financial instruments admitted to trading on a regulated market operated by it comply with the admission requirements for those instruments.

(8) The rules must provide that where an exchange, without obtaining the consent of the issuer, admits to trading on a regulated market operated by it a transferable security which has been admitted to trading on another regulated market, the exchange—

(a)must inform the issuer of that security as soon as is reasonably practicable, and

(b)may not require the issuer of that security to demonstrate compliance with the disclosure obligations.

(9) The rules must provide that where an exchange, without obtaining the consent of the issuer, admits to trading on a multilateral trading facility operated by it a transferable security which has been admitted to trading on a regulated market, it may not require the issuer of that security to demonstrate compliance with the disclosure obligations.

(10) In this paragraph—

“derivatives” has the same meaning as in the markets in financial instruments directive;

“the disclosure obligations” are the initial, ongoing and ad hoc disclosure requirements contained in the relevant articles and given effect—

(a)

in the UK by Part 6 of the Act and Part 6 rules (within the meaning of section 73A of the Act); or

(b)

in another EEA State by legislation transposing the relevant articles in that State.

“issuer” has the same meaning as in the markets in financial instruments directive;

“the relevant articles” means—

(a)

Article 6.1 to 6.4 of Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation,

(b)

Articles 3, 5, 7, 8, 10, 14 and 16 of Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectuses to be published when securities are offered to the public or admitted to trading,

(c)

Articles 4 to 6, 14, 16 to 19 and 30 of Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 relating to the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, and

(d)

Community legislation made under the provisions mentioned in paragraphs (a) to (c).

(11) This paragraph is without prejudice to the generality of paragraph 4.

Access to the exchange’s facilitiesU.K.

7B.—(1) The exchange must make transparent and non-discriminatory rules, based on objective criteria, governing access to, or membership of, its facilities.U.K.

(2) In particular those rules must specify the obligations for users or members of its facilities arising from—

(a)the constitution and administration of the exchange;

(b)rules relating to transactions on the market;

(c)its professional standards for staff of any investment firm or credit institution having access to or membership of a financial market operated by the exchange;

(d)conditions established under sub-paragraph (3)(c) for access to or membership of a financial market operated by the exchange by persons other than investment firms or credit institutions; and

(e)the rules and procedures for clearing and settlement of transactions concluded on a financial market operated by the exchange.

(3) Rules of the exchange about access to, or membership of, a financial market operated by it must permit the exchange to give access to or admit to membership (as the case may be) only—

(a)an investment firm,

(b)a credit institution, or

(c)a person who—

(i)is fit and proper,

(ii)has a sufficient level of trading ability and competence,

(iii)where applicable, has adequate organisational arrangements, and

(iv)has sufficient resources for the role he is to perform, taking account of the exchange's arrangements under paragraph 4(2)(d).

(4) Rules under this paragraph must enable—

(a)an investment firm authorised under Article 5 of the markets in financial instruments directive, or

(b)a credit institution authorised under the [F15capital requirements directive],

by the competent authority of another EEA State (including a branch established in the United Kingdom of such a firm or institution) to have direct or remote access to, or membership of, any financial market operated by the exchange on the same terms as a UK firm.

(5) The exchange must make arrangements regularly to provide [F1the FCA] with a list of the users or members of its facilities.

(6) This paragraph is without prejudice to the generality of paragraph 4.

Textual Amendments

Access to central counterparty, clearing and settlement facilitiesU.K.

7C.—(1) This paragraph applies to an exchange which provides central counterparty, clearing or settlement facilities.U.K.

(2) The exchange must make transparent and non-discriminatory rules, based on objective criteria, governing access to those facilities.

(3) The rules under sub-paragraph (2) must enable an investment firm or a credit institution authorised by the competent authority of another EEA State (including a branch established in the United Kingdom of such a firm or institution) to have access to those facilities on the same terms as a UK firm for the purposes of finalising or arranging the finalisation of transactions in financial instruments.

(4) The exchange may refuse access to those facilities on legitimate commercial grounds.

Choice of settlement facilitiesU.K.

7D.—(1) The rules of the exchange must permit a user or member of a regulated market operated by it to use whatever settlement facility he chooses for a transaction.U.K.

(2) Sub-paragraph (1) only applies where—

(a)such links and arrangements exist between the chosen settlement facility and any other settlement facility as are necessary to ensure the efficient and economic settlement of the transaction; and

(b)the exchange is satisfied that the smooth and orderly functioning of the financial markets will be maintained.

Suspension and removal of financial instruments from tradingU.K.

7E.  The rules of the exchange must provide that the exchange must not exercise its power to suspend or remove from trading on a regulated market operated by it any financial instrument which no longer complies with its rules, where such step would be likely to cause significant damage to the interests of investors or the orderly functioning of the financial markets.]U.K.

DisciplineU.K.

8.—[F16(1) The exchange must have—U.K.

(a)effective arrangements (which include the monitoring of transactions effected on the exchange) for monitoring and enforcing compliance with its rules, including rules in relation to the provision of clearing services in respect of transactions other than transactions effected on the exchange;

(b)effective arrangements for monitoring and enforcing compliance with the arrangements made by it as mentioned in paragraph 4(2)(d); and

(c)effective arrangements for monitoring transactions effected on the exchange in order to identify disorderly trading conditions.]

(2) Arrangements made pursuant to sub-paragraph (1) must include procedures for—

(a)investigating complaints made to the exchange about the conduct of persons in the course of using the exchange’s facilities; and

(b)the fair, independent and impartial resolution of appeals against decisions of the exchange.

(3) Where arrangements made pursuant to sub-paragraph (1) include provision for requiring the payment of financial penalties, they must include arrangements for ensuring that any amount so paid is applied only in one or more of the following ways—

(a)towards meeting expenses incurred by the exchange in the course of the investigation of the breach in respect of which the penalty is paid, or in the course of any appeal against the decision of the exchange in relation to that breach;

(b)for the benefit of users of the exchange’s facilities;

(c)for charitable purposes.

Textual Amendments

Commencement Information

I7Sch. para. 8 in force at 1.12.2001, see reg. 2

ComplaintsU.K.

9.—(1) The exchange must have effective arrangements for the investigation and resolution of complaints arising in connection with the performance of, or failure to perform, any of its regulatory functions.U.K.

(2) But sub-paragraph (1) does not extend to—

(a)complaints about the content of rules made by the exchange, or

(b)complaints about a decision against which the complainant has the right to appeal under procedures of the kind mentioned in paragraph 8(2)(b) above.

(3) The arrangements must include arrangements for a complaint to be fairly and impartially investigated by a person independent of the exchange, and for him to report on the result of his investigation to the exchange and to the complainant.

(4) The arrangements must confer on the person mentioned in sub-paragraph (3) the power to recommend, if he thinks it appropriate, that the exchange—

(a)makes a compensatory payment to the complainant,

(b)remedies the matter complained of,

or takes both of those steps.

(5) Sub-paragraph (3) is not to be taken as preventing the exchange from making arrangements for the initial investigation of a complaint to be conducted by the exchange.

Commencement Information

I8Sch. para. 9 in force at 1.12.2001, see reg. 2

[F17Operation of a multilateral trading facilityU.K.

Textual Amendments

9A.—(1) An exchange operating a multilateral trading facility must also operate a regulated market.U.K.

(2) An exchange operating a multilateral trading facility must comply with those requirements of—

(a)Chapter I of Title II of the markets in financial instruments directive, and

(b)Commission Directive 2006/73/EC of 10 August 2006,

which are applicable to a market operator (within the meaning of the directive) operating such a facility.

(3) The requirements of this paragraph do not apply for the purposes of section 292(3)(a) of the Act (requirements for overseas investment exchanges and overseas clearing houses).]