On 14 September 2018, the FCA published a direction explaining how market operators of the European Economic Area (EEA) carrying out regulated activities in the UK may apply to obtain the Recognised Overseas Investment Exchange (ROIE) status.
Background
After the UK exits the European Union in March 2019, passport rights under the second Markets in Financial Instruments Directive (MiFID II) will no longer be available to EEA market operators operating a regulated market which is a multilateral Trading Facility (MTF) or an Organised Trading Facility (OTF). HM Treasury has decided against putting in place a temporary recognition regime for EEA market operators in case the UK leaves the EU without a deal and without entering an implementation period. Unless they are able to rely on the overseas persons exclusion, EEA market operators who are currently undertaking regulated activities in the UK and who wish to preserve their UK presence will have to apply for a recognition order to become ROIEs.
The Direction
In its direction the FCA sets out its expectations of EEA market operators and notes that the recognition requirements and application process have been streamlined, in consideration of the fact that EEA market operators need to comply with the MiFID II and Markets in Financial Instruments Regulation (MiFIR) framework. The FCA also clarified that supervisory cooperation will remain a key element of the ROIE regime.
Overseas market operators, i.e. persons with their head and registered office outside of the UK, will have to submit an application to the FCA in order to be recognised as an ROIE. The application should be made in accordance with Chapter 6 of the Recognised Investment Exchange and Recognised Clearing House sourcebook (REC) of the FCA Handbook.
Applicants will have to submit a regulatory business plan explaining the arrangements to be established or maintained in the UK as well as information relating to the nature of the membership, the range of specified investments and business continuity arrangements; and a letter from the overseas applicant confirming its willingness to cooperate with the FCA, which may involve information sharing, and verifying that it is in compliance with the MiFID II / MiFIR regime or the relevant regime in its home jurisdiction.
The FCA clarifies that EEA applicants will have to submit the explanatory material prescribed under REC 6.2.4G(1) and REC 6.3 only in relation to some of the recognition requirements.
Next steps
EEA market operators wishing to maintain arrangements in the UK should contact the FCA as soon as possible in order to make the regulator aware of their plans and apply for ROIE status no later than 6 months before they expect the recognition order to take effect.
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