Part XVIII Recognised Investment Exchanges and Clearing Houses
Chapter I Exemption
Applications for recognition
287 Application by an investment exchange.
(1)
Any body corporate or unincorporated association may apply to F1the FCA for an order declaring it to be a recognised investment exchange for the purposes of this Act.
(2)
The application must be made in such manner as F2the FCA may direct and must be accompanied by—
(a)
a copy of the applicant’s rules;
(b)
a copy of any guidance issued by the applicant;
(c)
the required particulars; and
(d)
such other information as F2the FCA may reasonably require for the purpose of determining the application.
(3)
The required particulars are—
(a)
particulars of any arrangements which the applicant has made, or proposes to make, for the provision F3by another person of clearing services in respect of transactions effected on the exchange;
(b)
(c)
a programme of operations which includes the types of business the applicant proposes to undertake and the applicant's proposed organisational structure;
(d)
such particulars of the persons who effectively direct the business and operations of the exchange as F6the FCA may reasonably require;
(e)
such particulars of the ownership of the exchange, and in particular of the identity and scale of interests of the persons who are in a position to exercise significant influence over the management of the exchange, whether directly or indirectly, as F7the FCA may reasonably require.
F8(4)
Subsection (3)(c) to (e) does not apply to an application by an overseas applicant.
F9287A.Application by an investment exchange: persons connected with an applicant
(1)
Subsection (2) applies where—
(a)
a body corporate or unincorporated association (“A”) makes an application under section 287 for an order declaring it to be a recognised investment exchange; and
(b)
A is—
(i)
connected with an EEA credit institution or EEA insurance undertaking; or
(ii)
controlled by a person who also controls an EEA credit institution or EEA insurance undertaking.
(2)
Before making a recognition order declaring A to be a recognised investment exchange under section 290, the FCA must consult the competent authority responsible for the supervision of the EEA credit institution or EEA insurance undertaking.
(3)
A is connected with an EEA credit institution or EEA insurance undertaking if—
(a)
A is a subsidiary undertaking of the EEA credit institution or EEA insurance undertaking; or
(b)
A is a subsidiary undertaking of a parent undertaking of the EEA credit institution or EEA insurance undertaking.
(4)
In this section—
“control” has the same meaning as in Article 4.1.35(b) (definitions) of the markets in financial instruments directive;
“EEA credit institution” means a credit institution (as defined by Article 4.1.27 of the markets in financial instruments directive) authorised in another EEA State under the capital requirements directive;
“EEA insurance undertaking” means an insurance undertaking (as defined by Article 13.1 of the Solvency 2 Directive) authorised in another EEA State.
288 Application by a clearing house.
F10(1)
A body corporate or unincorporated association which is established in the United Kingdom may, where it intends to provide clearing services as a central counterparty, apply to the Bank of England in accordance with Article 17 of the EMIR regulation for an order granting authorisation for the purposes of that Article and declaring it to be a recognised central counterparty for the purposes of this Act.
(1A)
A body corporate or unincorporated association may, where it intends to provide clearing services in the United Kingdom without doing so as a central counterparty, apply to the Bank of England for an order declaring it to be for the purposes of this Act a recognised clearing house which is not a recognised central counterparty.
(2)
F11An application under subsection (1A) must be made in such manner as F12the Bank of England may direct and must be accompanied by—
(a)
a copy of the applicant’s rules;
(b)
a copy of any guidance issued by the applicant;
(c)
the required particulars; and
(d)
such other information as F13the Bank may reasonably require for the purpose of determining the application.
(3)
The required particulars are—
(a)
if the applicant makes, or proposes to make, clearing arrangements with a recognised investment exchange, particulars of those arrangements;
(b)
if the applicant proposes to provide clearing services F14or services falling within section 285(3)(b) for persons other than recognised investment exchanges, particulars of the criteria which it will apply when determining to whom it will provide those services.
289 Applications: supplementary.
(1)
At any time after receiving an application and before determining it, F15the appropriate regulator may require the applicant to provide such further information as it reasonably considers necessary to enable it to determine the application.
(2)
(3)
Different directions may be given, or requirements imposed, by F17the appropriate regulator with respect to different applications.
F18(4)
In relation to an application under section 288(1), this section does not apply to information which can be required under Article 17 of the EMIR regulation.
290 Recognition orders.
F19(1)
If it appears to the appropriate regulator that the applicant satisfies the recognition requirements applicable in its case, the regulator may—
(a)
where the application is made under section 287, make a recognition order declaring the applicant to be a recognised investment exchange;
(b)
where the application is made under section 288(1) and Article 17 of the EMIR regulation allows authorisation to be granted, make a recognition order (“a central counterparty recognition order”) granting authorisation for the purposes of that Article and declaring the applicant to be a recognised central counterparty; or
(c)
where the application is made under section 288(1A), make a recognition order declaring the applicant to be a recognised clearing house which is not a recognised central counterparty.
F20(1A)
In the case of an application for an order declaring the applicant to be a recognised investment exchange, the reference in subsection (1) to the recognition requirements applicable in its case includes a reference to requirements contained in any directly applicable F21EU regulation made under the markets in financial instruments directive F22or the markets in financial instruments regulation .
(1B)
In the case mentioned in subsection (1A), the application must be determined by F23the FCA before the end of the period of six months beginning with the date on which it receives the completed application.
(1C)
Subsection (1B) does not apply in the case of an application by an overseas applicant.
F24(1D)
A central counterparty recognition order must specify the services or activities linked to clearing which the applicant may provide or perform and the classes of financial instruments covered by the order.
F25(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
(4)
A recognition order must specify a date on which it is to take effect.
(5)
Section 298 has effect in relation to a decision to refuse to make a recognition order F28in respect of an investment exchange or a clearing house which is not a central counterparty—
(a)
as it has effect in relation to a decision to revoke such an order; and
(b)
as if references to a recognised body were references to the applicant.
F29(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F30(7)
Where—
(a)
a body corporate or unincorporated association has made an application under section 288(1), and
(b)
the Bank of England has determined that application in accordance with Article 17 of the EMIR regulation,
any previous recognition order under section 290(1)(c) or 292(2)(b) shall cease to be valid.
F31290ZA.Variation of central counterparty recognition order
(1)
On an application made to it in accordance with Article 15 of the EMIR regulation, the Bank of England may in accordance with Article 17 of that regulation vary a central counterparty recognition order by specifying an additional service or activity or class of financial instruments.
(2)
Where Article 20(5) of the EMIR regulation applies, the Bank of England may vary a central counterparty recognition order by removing a service or activity or class of financial instruments from those specified in the order.
(3)
The Bank of England may at any time vary a central counterparty recognition order for the purpose of correcting an error in, or omission from, the order.
F32290ARefusal of recognition on ground of excessive regulatory provision
(1)
F33The appropriate regulator must not make a recognition order if it appears to F34it that an existing or proposed regulatory provision of the applicant in connection with—
(a)
the applicant's business as an investment exchange, F35...
(b)
the provision by the applicant of clearing services, F36or
(c)
the provision by the applicant of services falling within section 285(2)(b) or (3)(b),
imposes or will impose an excessive requirement on the persons affected (directly or indirectly) by it.
(2)
The reference in section 290(1) (making of recognition order) to satisfying the applicable recognition requirements shall be read accordingly.
(3)
Expressions used in subsection (1) above that are defined for the purposes of section 300A (power of F37appropriate regulator to disallow excessive regulatory provision) have the same meaning as in that section.
(4)
The provisions of section 300A(3) and (4) (determination whether regulatory provision excessive) apply for the purposes of this section as for the purposes of section 300A.
(5)
Section 298 has effect in relation to a decision under this section to refuse a recognition order—
(a)
as it has effect in relation to a decision to revoke such an order, and
(b)
as if references to a recognised body were references to the applicant.
F38(6)
This section does not apply to an application for recognition as an overseas investment exchange, an overseas clearing house or a recognised central counterparty.
291 Liability in relation to recognised body’s regulatory functions.
(1)
A recognised body and its officers and staff are not to be liable in damages for anything done or omitted in the discharge of the recognised body’s regulatory functions unless it is shown that the act or omission was in bad faith.
(2)
But subsection (1) does not prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the M1Human Rights Act 1998.
(3)
“Regulatory functions” means the functions of the recognised body so far as relating to, or to matters arising out of, the obligations to which the body is subject under or by virtue of this Act.
292 Overseas investment exchanges and overseas clearing houses.
(1)
An application under section 287 or F39288(1A) by an overseas applicant must contain the address of a place in the United Kingdom for the service on the applicant of notices or other documents required or authorised to be served on it under this Act.
(2)
If it appears to F40the appropriate regulator that an overseas applicant satisfies the requirements of subsection (3) it may make a recognition order declaring the applicant to be—
(a)
a recognised investment exchange;
(b)
a recognised clearing house F41which is not a central counterparty.
(3)
The requirements are that—
F42(a)
investors are afforded protection equivalent to that which they would be afforded if the body concerned were required to comply with—
(i)
recognition requirements, other than any such requirements which are expressed in regulations under section 286 not to apply for the purposes of this paragraph, and
(ii)
requirements contained in any directly applicable EU regulation made under the markets in financial instruments directive or the markets in financial instruments regulation;
(b)
there are adequate procedures for dealing with a person who is unable, or likely to become unable, to meet his obligations in respect of one or more market contracts connected with the investment exchange or clearing house;
(c)
the applicant is able and willing to co-operate with F43the appropriate regulator by the sharing of information and in other ways;
(d)
adequate arrangements exist for co-operation between F44the appropriate regulator and those responsible for the supervision of the applicant in the country or territory in which the applicant’s head office is situated.
(4)
In considering whether it is satisfied as to the requirements mentioned in subsection (3)(a) and (b), F45the appropriate regulator is to have regard to—
(a)
the relevant law and practice of the country or territory in which the applicant’s head office is situated;
(b)
the rules and practices of the applicant.
(5)
In relation to an overseas applicant and a body or association declared to be a recognised investment exchange or recognised clearing house by a recognition order made by virtue of subsection (2)—
(a)
the reference in section 313(2) to recognition requirements is to be read as a reference to matters corresponding to the matters in respect of which provision is made in the recognition requirements;
(b)
sections 296(1) and 297(2) have effect as if the requirements mentioned in section 296(1)(a) and section 297(2)(a) were those of subsection (3)(a), (b), and (c) of this section;
(c)
section 297(2) has effect as if the grounds on which a recognition order may be revoked under that provision included the ground that in the opinion of F46the appropriate regulator arrangements of the kind mentioned in subsection (3)(d) no longer exist.
F47(6)
Where a recognised clearing house is authorised as an EEA central counterparty or recognised as a third country central counterparty, any previous recognition order under section 290(1)(c) or 292(2)(b) shall cease to be valid.