The U.K.'s Financial Conduct Authority on March 13 clarified its position toward the Markets in Financial Instruments Directive, or MiFID II, derivatives trading obligations and benchmark regulation in case of a hard Brexit.
The regulator was responding to a March 7 statement issued by the European Securities and Markets Authority.
The FCA said U.K. and European Union trading venues will operate on identical standards regardless of whether there is an implementation period or not after Britain's divorce from the bloc because of the Treasury's onshoring of certain EU legislation into U.K. law.
U.K.-based investment firms will not be required to report transactions conducted on EU trading venues involving instruments that are also traded at a U.K. trading venue. However, commodity derivative contracts traded on EU trading venues will not be equivalent to over-the-counter contracts.
Additionally, U.K. firms that do not have reporting obligations for business conducted with an EU-27 investment firm under temporary transitional power will not be required to report these transactions via a U.K. Approved Publication Arrangement for 15 months following Brexit. EU-27 investment firms with branches in the U.K. that have entered the temporary permissions regime can meet their U.K. trade reporting obligations by disclosing their trades via an EU APA.
The regulator said that for certain derivatives investment companies will only be allowed to complete transactions on regulated markets, multilateral trading facilities or organized trading facilities established in the U.K. or on third-country venues in jurisdictions the U.K. has adopted an equivalence decision for.
The FCA said that it will set up a U.K. public register of authorized benchmarks and administrators according to its onshoring approach toward EU benchmark regulation.