2. Regulated Markets (RMs)

2. Regulated Markets (RMs)

Who should read this chapter?

This chapter is relevant for the operators of UK RMs such as Recognised Investment Exchanges (RIEs).
It may also be of interest to direct and indirect users of RMs such as investment banks, interdealer brokers, high frequency traders, and investment managers.



MiFID II has updated the framework for RMs in a number of ways including; to increase transparency, strengthen the management of the risks posed by algorithmic trading and improve the post-trade processes.  Proposed detailed rules on these matters and others have been set out by ESMA in a number of relevant draft RTSs; RTS 7[1], RTS 8[2], RTS 9[3], RTS 10[4], RTS 11[5] and RTS 12[6].

The Treasury consulted on changes to Part 18 of FSMA and to the FSMA (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001 (RRRs) required to implement MiFID II, in March 2015[7]. These changes largely concerned new requirements in respect of the ‘management body’ of an RIE, and systems and controls in respect of algorithmic trading, including HFT and direct electronic access. To address the concern with algorithmic trading these changes cover market-making schemes, new measures to prevent disorderly markets and tick sizes.

This section covers the amendments to REC necessary to reflect the changes to the RRRs. The amendments also take account of MiFIR, and the draft RTS set out above.

The amended REC sets out the new recognition requirements, amends existing guidance where it duplicates areas covered by the draft RTS or by MiFIR, and adds new guidance where relevant.

Changes to REC to reflect new systems and controls 

The changes to REC should be read in conjunction with the RTS mentioned in the introduction above. There are references to those RTS at relevant places in the proposed changes to REC. We will take compliance with these detailed standards into account, where relevant, in assessing the adequacy of an RIE’s systems and controls.

We are proposing three new sections in REC: 2.4A which deals with the new requirements in MiFID II on the management bodies of RMs; 2.7A on position management and position reporting for commodity derivatives (this refers to a new section of MAR, MAR 10, which we will consult on next year); and 2.16B which deals with the operation of a data reporting services provider.

Significant revisions to other parts of REC include: REC 2.16A to cover changes to the trading processes for MTFs and the introduction of OTFs (which are discussed further in chapters 3 and 4); REC 2.6 to deal with the suspension and removal of financial instruments and the new provisions on trade transparency (which are discussed further in chapter 6); and REC 2.5 to cover the requirements in MiFID II on algorithmic trading (algorithmic trading rules for MTFs and OTFs are discussed in chapter 8). 

Q2:  Do you agree with our approach outlined above to amend REC to take account of the MiFID II changes? If not, please give reasons why

Q3:  Do you foresee any implementation issues with the approach above?



  1. ^ RTS 7 - Draft regulatory technical standards on organisational requirements of regulated markets, multilateral trading facilities and organised trading facilities enabling or allowing algorithmic trading through their systems
  2. ^ RTS 8 - Draft regulatory technical standards on market making:agreements and market making schemes
  3. ^ RTS 9 - Draft regulatory technical standards on the ratio of:unexecuted orders to transactions
  4. ^ RTS 10 - Draft regulatory technical standards on requirements to ensure co-location and fee structures are fair and non-discriminatory
  5. ^ RTS 11 -  Draft regulatory technical standards on the tick size regime for shares, depositary receipts and exchange traded funds
  6. ^ RTS 12 - Draft regulatory technical standards on the determination of a material market in terms of liquidity relating to trading halt notifications
  7. ^ https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/418282/Annex_A_-_MiFID2_Regs_-_Consultation_Final.pdf