Financial Services and Markets Act 2023

PART 2 U.K. Amendments to the European Market Infrastructure Regulation

28 U.K. Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories is amended in accordance with this Part of this Schedule.

Commencement Information

I1 Sch. 2 para. 28 not in force at Royal Assent, see s. 86(3)

I2 Sch. 2 para. 28 in force at 29.8.2023 by S.I. 2023/779, reg. 4(zz)(ii)

29 U.K. After Article 6a insert—

“Article 6b U.K. Risk reduction services

1. The Bank of England may by rules provide for the clearing obligation referred to in Article 4(1) in respect of a class or classes of OTC derivatives not to apply—

(a) in relation to activities or transactions of a specified description carried out as part of a risk reduction service, or

(b) to persons of a specified description in the provision of such services.

2. The power to make rules under paragraph 1 is exercisable only if the Bank of England considers that the rules are necessary or expedient for the purpose of advancing the financial stability objective under section 2A of the Bank of England Act 1998.

3. The risk reduction services to which the rules relate may only be post-trade services that do not give rise to any transactions that contribute to the price discovery process.

4. The rules—

(a) may describe the risk reduction services to which they relate in whatever way the Bank of England considers appropriate (subject to paragraph 3);

(b) may provide for whatever conditions or exceptions the Bank of England considers appropriate.

5. In this Article—

• “risk reduction service” means a service provided to two or more counterparties to derivatives transactions for the purpose of reducing non-market risks in derivatives portfolios (including, for example, portfolio compression);

• “specified” means specified in the rules.”

Commencement Information

I3 Sch. 2 para. 29 not in force at Royal Assent, see s. 86(3)

I4 Sch. 2 para. 29 in force at 29.8.2023 by S.I. 2023/779, reg. 4(zz)(ii)

30 U.K. After Article 84b insert—

“Article 84c U.K. Bank of England rules

1. The provisions of Part 9A of FSMA (rules and guidance) listed in paragraph 2 apply in relation to rules made by the Bank of England under Article 6b, subject to the modifications in paragraphs 3 to 5.

2. The provisions are—

(a) section 137T (general supplementary powers);

(b) sections 138A and 138B (modification or waiver of rules), but with the omission of subsection (4)(b) of section 138A and subsection (4) of section 138B;

(c) section 138C (evidential provisions);

(d) section 138E (limits on effect of contravening rules);

(e) section 138F (notification of rules);

(f) section 138G (rule-making instruments);

(g) section 138H (verification of rules);

(h) section 138J (consultation by the PRA), but with the omission of subsections (2)(c) and (5)(b);

(i) section 138L (consultation: general exceptions), but with the omission of subsection (1).

3. Any reference in any of those provisions to an authorised person is to be read as a reference to a person to whom the clearing obligation referred to in Article 4(1) applies.

4. Section 138J(2)(d) has effect in relation to rules proposed to be made by the Bank of England as if the reference to the compatibility of the proposed rules with the provisions mentioned in section 138J(2)(d) were a reference to their compatibility with the Bank of England’s financial stability objective under section 2A of the Bank of England Act 1998.

5. Section 138L(2) has effect as if for paragraphs (a) and (b) there were substituted “be prejudicial to financial stability”.”

Commencement Information

I5 Sch. 2 para. 30 not in force at Royal Assent, see s. 86(3)

I6 Sch. 2 para. 30 in force at 29.8.2023 by S.I. 2023/779, reg. 4(zz)(ii)