Local wholesale investment firms and authorisation

Find out which permissions to apply for in order to become authorised.

Typical permissions required 

  • dealing as principal
  • agreeing to carry on regulated activities

Local firms do not have external clients.

From 3 January 2018 MiFID removes the exemption for local firms. As a result, these firms will be brought within scope of MiFID/MiFIR. Most should, however, benefit from a lighter prudential regime under the CRD, because they are likely to fall within the 'local firm' definition in Art 4(3) CRR:

‘Local firm’ means a firm dealing for its own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets’.

The performance of the firm’s contracts must be guaranteed by, and is the responsibility of, one or more of the clearing members of the same futures and options exchange.

In order to benefit from the ‘local firm’ prudential regime under the CRD, a firm will have to meet the definition. As of the entry into application of MiFID, local firms who wish to benefit from this prudential treatment will need to agree to have a requirement on their Scope of Permission which mirrors the local firm wording in the CRR.

Financial resource requirement  

Local firms are caught by MiFID but exempted by CRR Article 4 for the purposes of own funds and as a consequence are subject to IPRU-INV Chapter 9 (local firm which is an Exempt CAD firm).

As per Article 30 of CRD, local firms are required to have initial capital of EUR 50,000 insofar as they benefit from the freedom of establishment or to provide services specified in Articles 31 and 32 of MiFID.

Detailed information

Discover more about financial resource requirements in IPRU (INV) 3

To confirm which sourcebook your firm should refer to, see PERG 13.6, questions 60 to 66 

For MiFID exemptions, see PERG 13.5