xmlns:atom="http://www.w3.org/2005/Atom" xmlns:atom="http://www.w3.org/2005/Atom"

TITLE IIU.K.TRANSPARENCY FOR TRADING VENUES

CHAPTER 1U.K.Transparency for equity instruments

Article 5U.K.Volume Cap Mechanism

1.In order to ensure that the use of the waivers provided for in Article 4(1)(a) and 4(1)(b)(i) does not unduly harm price formation, trading under those waivers is restricted as follows:

(a)the percentage of trading in a financial instrument carried out on a trading venue under those waivers shall be limited to 4 % of the total volume of trading in that financial instrument on all trading venues [F1across the relevant area] over the previous 12 months.

(b)[F2overall trading in the relevant area] in a financial instrument carried out under those waivers shall be limited to 8 % of the total volume of trading in that financial instrument on all trading venues [F3across the relevant area] over the previous 12 months.

That volume cap mechanism shall not apply to negotiated transactions which are in a share, depositary receipt, ETF, certificate or other similar financial instrument for which there is not a liquid market as determined in accordance with Article 2(1)(17)(b) and are dealt within a percentage of a suitable reference price as referred to in Article 4(1)(b)(ii), or to negotiated transactions that are subject to conditions other than the current market price of that financial instrument as referred to in Article 4(1)(b)(iii).

2.[F4Subject to paragraph 3A] when the percentage of trading in a financial instrument carried out on a trading venue under the waivers [F5appears to the FCA to have exceeded] the limit referred to in paragraph 1(a), [F6the FCA] shall within two working days suspend their use on that venue in that financial instrument based on the data published by [F7the FCA] referred to in paragraph 4, for a period of six months.

3.[F8Subject to paragraph 3A] when the percentage of trading in a financial instrument carried out on all trading venues [F9across the relevant area] under those waivers [F10appears to the FCA to have exceeded] the limit referred to in paragraph 1(b), [F11the FCA] shall within two working days suspend the use of those waivers across [F12the United Kingdom] for a period of six months.

[F133A.Paragraphs 2 and 3 do not apply during the period (“the transitional period”)—

(a)of four years beginning with IP completion day; or

(b)ending on the day directed by the Treasury, where this is earlier.

3B.During the transitional period, the FCA may suspend the use of a waiver provided for in Article 4(1)(a) and 4(1)(b)(i) for a period of up to six months to ensure that its use does not unduly harm price formation if the FCA considers it necessary to do so to advance the FCA's integrity objective under section 1D of FSMA.

3C.The FCA may renew a suspension imposed under paragraph 3B at the end of the six-month period referred to in that paragraph if it considers that the conditions which led it to impose a suspension still exist at that date.

3D.In deciding whether to suspend the use of a waiver under paragraph 3B, or to renew a suspension under paragraph 3C, the FCA—

(a)must also take into account—

(i)its consumer protection objective and competition objective under sections 1C and 1E of FSMA;

(ii)the thresholds applying under Article 5 of Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments as it has effect in EU law; and

(iii)the most recent information published by ESMA under Article 5(4), 5(5) and 5(6) before IP completion day;

(b)may take into account—

(i)any relevant information produced under Article 3, or under equivalent pre-trading transparency requirements in other jurisdictions, about the use of the waiver in the United Kingdom, or under equivalent waiver arrangements in any other country, in relation to the financial instrument; and

(ii)any relevant information available in relation to trading volumes in the financial instrument concerned, whether in the United Kingdom or in any other country.

3E.In deciding whether to issue a direction terminating the transitional period, the Treasury must take into account whether the FCA is able to carry out its functions relating to transparency under this Regulation and its implementing measures (as amended under the European Union (Withdrawal) Act 2018).]

4.[F14After the transitional period, the FCA] shall publish within [F15ten working days] of the end of each calendar month, the total volume of [F16trading in the relevant area] per financial instrument in the previous 12 months, the percentage of trading in a financial instrument carried out [F17across the relevant area] under those waivers and on each trading venue in the previous 12 months, and the methodology that is used to derive those percentages.

5.In the event that the report referred to in paragraph 4 identifies any trading venue where trading in any financial instrument carried out under the waivers has exceeded 3,75 % of the total trading in [F18the relevant area] in that financial instrument, based on the previous 12 months’ trading, [F19the FCA] shall publish an additional report within [F20ten working days] of the 15th day of the calendar month in which the report referred to in paragraph 4 is published. That report shall contain the information specified in paragraph 4 in respect of those financial instruments where 3,75 % has been exceeded.

6.In the event that the report referred to in paragraph 4 identifies that overall [F21trading in the relevant area] in any financial instrument carried out under the waivers has exceeded 7,75 % of the total [F21trading in the relevant area] in the financial instrument, based on the previous 12 months’ trading, [F22the FCA] shall publish an additional report within [F23ten working days] of the 15th on the day of the calendar month in which the report referred to in paragraph 4 is published. That report shall contain the information specified in paragraph 4 in respect of those financial instruments where 7,75 % has been exceeded.

7.In order to ensure a reliable basis for monitoring the trading taking place under those waivers and for determining whether the limits referred to in paragraph 1 have been exceeded, operators of trading venues shall be obligated to have in place systems and procedures to:

(a)enable the identification of all trades which have taken place on its venue under those waivers; and

(b)ensure it does not exceed the permitted percentage of trading allowed under those waivers as referred to in paragraph 1(a) under any circumstances.

8.F24... Without prejudice to Article 4(5), [F25the FCA] shall be empowered to suspend the use of those waivers from the date of application of this Regulation and thereafter on a monthly basis.

9.[F26 The FCA may make] technical standards to specify the method, including the flagging of transactions, by which it collates, calculates and publishes the transaction data, as outlined in paragraph 4, in order to provide an accurate measurement of the total volume of trading per financial instrument and the percentages of trading that use those waivers [F27across the relevant area] and per trading venue.

F28...

F28...

10.[F29For the purposes of this Article, “the relevant area” consists of the United Kingdom and those countries or regions specified by the FCA by direction in accordance with Article 50B.

11.The FCA may only give a direction under paragraph 10 specifying that a country or region is in the relevant area in relation to one or more financial instruments for the purposes of this Article if the FCA is able to obtain sufficient reliable trading data to enable it to assess the volume of trading in the financial instruments concerned in that country or region.]

Textual Amendments