U.K. – FCA MiFID, CRD, Handbook

On 10 November, FCA issued rules in handbook notice 49 on MiFID, CRD IV.

  • Follows December 2015, FCA new rules on secondary trading per MiFID II.
  • And July 2015, FCA new second rule-set on implementation of MiFID II.
  • Handbook notice makes rule changes to MiFID II Guide and IFPRU 2.2. for CRD IV.

MiFID II Guide

  • MiFID II Guide Instrument 2017 (FCA 2017/63) adds new definition to Handbook.
  • The guide is to sit on FCA Handbook website but will not form part of handbook.
  • Instrument comes into force 3 January 2018, in line with remaining MiFID provisions.


  • Instrument makes changes to Handbook to ensure implementation of Art 83 CRD.
  • It comes into force on 10 November. Feedback to consultation is in Chap 3 of the notice.

E.U. – ESMA Updated FAQs Re: Protection

On 10 November, ESMA added four questions to FAQs on MiFID II investor protection topics.

  • The new question cover topics of post-sale reporting, record keeping and inducements.
  • Clarifies that securities financing transactions are in scope of Art 16(6) record keeping.
  • And that Art 62(1) Del Reg 2017/565 report applies to retail and professional clients.

U.K. – FCA Market Watch MiFID/LEI

On 8 November, UK FCA issued market watch on conduct, trade reporting.

  • FCA issued market watch 54 newsletter on market conduct and trade reporting issues.
  • Covers LEIs, ESMA instrument reference data, FCA transitional arrangements, trading
    venue operator, MiFID II and market data obligations, authorizations and permissions.

Legal Entity Identifier (LEI)

  • Firms with transaction reporting obligation must establish an LEI and keep it updated.
  • Include investment firms authorized under MiFID, and credit institution under CRD IV.
  • Also for operators of a trading venue, or UK branch of a third country investment firm.
  • Such firms are also required to include eligible clients’ LEIs in their transaction reports.
  • Clients who are legal entities or structure including companies, charities or trust must
    obtain LEI code, if they want their executing firm to continue to act from 3 January 2018.
  • FCA has produced leaflet which executing firms can use in communication with clients.

ESMA Instrument Reference Data

  • ESMA has issued detail of reference data files, together with instructions downloading.
  • Identified the financial instruments in scope for MAR, but noted ESMA statement that
    it could not take responsibility for information being complete, accurate, or up to date.

FCA Transitional Arrangements

  • On 12 January 2018, FCA is decommissioning MiFID I transaction reporting system (ZEN).
  • Will use new FCA Market Data Processor (MDP) IT system to meet the new transaction
    reporting requirements for MiFIR, which are due to come into effect from 3 January 2018.
  • Set out approach to MiFID I transaction reporting obligation after the cut-over to MiFIR.

Trading Venue Operators

  • Venue operators should not report the transaction of a UK branch of third country firm.
  • As FCA to receive transaction report from these firms as if they were MiFID investment
    firms trading venue operators should not report transactions on behalf of such persons.
  • Will avoid FCA receiving duplicate report, which gives misleading impression of activity.

Market Data Obligations

  • FCA has developed a new Market Data Reporting (MDP) system to enable management
    of large changes in volumes, range of market data types, which entities need to submit.
  • To meet new market data reporting obligations under MiFID II, MiFIR from 3 January 2018.
  • Have now made MDP Industry Test Environment, ITE, available for entities who wish to
    demonstrate they conform with technical specification and on-board to the MDP system.

Authorisations, Permissions for MiFID II

  • Firms needing new permission who have not submitted an application must take action.
  • Can only carry out MiFID II activity for which they have required regulatory permission.
  • Firms may need to plan for the required permissions not being in place by 3 January 2018.
  • If application already submitted FCA have subsequently informed that it is not complete
    must provide the missing information as soon as possible, or cannot assess applications.

Hong Kong – SFC Issues Updated FAQs and User Guide

On 8 November, SFC issued updated FAQs and user guide to reflect HKEx’s new website.


On 10 January, HK SFC issued user guide for reporting short positions.

  • Covered updates to user guide on short position reporting, under expanded scope.
  • Included short position reporting process, accessing SPR services, and registration.
  • Included registration acknowledgement, registration activation, completing forms.
  • As well as system breakdown, browser specification, security tips and contact info.


  • On reportable short positions, and those which are required to be notified to SFC.
  • SFC designation of online communication system, publish reported short positions.
  • Daily reporting requirements, reporting notice, specified shares and specified ATS.


  • From 15 March 2017, reporting required for short positions in designated securities.
  • Eligible for short selling specified by Stock Exchange of Hong Kong Limited (SEHK).
  • List of designated securities eligible for short selling is published on SEHK website.
  • From 15March 2017, SFC will cease publishing list of specified shares on its website.

France – AMF MiFID II Implementation

On 2 November, AMF proposed rules for final implementation of MiFID II.

  • he proposals amend procedures for the approval of investment service providers.
  • Amendments concern Book III and Book V of AMF’s General Regulation (RGAMF).

MiFID Implementation

  • Rules relate to authorization procedure for management, MTFs and position limits.
  • But also introduce provisions for the managers of organized trading facilities, data.
  • AMF is also proposing deleting sections which have now been superseded by MiFIR.
  • Investment advisers to be subject to equivalent conduct rules as investment firms.


  • Comments are due before 1 December 2017.

Malta – MFSA MiFID Trade Reporting

On 2 November, MFSA issued circular on transaction reporting for MiFID II.

  • On 26 October, MFSA seminar on MiFID II provided overview of legislative requirements.
  • During seminar industry raised queries relating to transaction reporting requirement.
  • Circular provides further analysis on some queries which were raised during seminar.
  • Guidance on content, timeline, collective investment schemes, legal entity identifiers.

Trade Reporting

  • MFSA will replicate TRS fields in Transaction Reporting Exchange Mechanism (TREM).
  • Three-phased approach to adopt TREM: on registration; connectivity test; validation.
  • Phase 1 – Registration, all entities which will submit, to file form to get TREM access.
  • Phase 2 – entities registered for TREM, able to test connectivity with MFSA mid-Nov.
  • Phase 3 – MFSA will be ready to receive reports for validation testing mid-December.
  • Submit compressed files, of XML file on MIFIR XSD schema will be parsed, validated.

Funds and LEI

  • MiFIR does not apply to managers of Collective Investment Schemes, as per details.
  • Cited MFSA 9 August 2016, circular reminding of need for legal entity identifier (LEI’).


  • MiFID II enters into force on 3 January  2018.

Australia – ASX Reverse Takeovers Listing

On 4 November, ASX issued final listing rule on reverse takeover issues.

  • Final rule regulates reverse takeovers, and voting exclusions in listing rule 14.11.
  • Minor amendment to rules 1.2 and 1.3 on accounts to provide ASX at application.

No Shareholder Approval

  • Current listing rule 7.1 requires a listed entity to obtain security holder approval,
    for issues of securities over 15% of fully paid ordinary capital in 12 month period.
  • Exception did not cover issues for a takeover bid to comply with Corporations Act.
    or a merger scheme by way of scheme of arrangement under part 5.1 of that Act.
  • Also excluded issues to fund the cash consideration payable under a takeover bid
    or a merger, if the terms of the issue are disclosed in the bid/scheme documents.
  • Thus, shareholder approval is not currently required for bidder to issue securities,
    under a takeover bid or merger scheme, regardless of number of securities issued.

Changes for Reverse Takeover

  • Above exceptions no longer apply to issues under, or to fund, a reverse takeover.
  • Thus issues for reverse takeover, will now require approval under listing rule 7.1.
  • Reverse takeover is where entity is proposing to acquire securities of other body,
    and aggregate number of equities or to be issued by entity exceeded threshold.
  • If issue equal to, or above, number of fully paid securities at announcement date.
  • Aggregate separate issues if ASX believe are part of same commercial transaction.


  • Followed ASX 10 November 2015 consultation, and 12 April 2017 feedback to responses.
  • ASX does not propose revision to the rule amendments it had previously published.
  • New listing rule amendments are scheduled, to come into effect from 1 December 2017.

U.S. – CFTC Issues $350k Fine Large Trade Reports

On 2 November, CFTC fined Morgan Stanley $350k for large trade reports.

  • Morgan Stanley, an FCM, is required to submit large trader report data to CFTC.

Alleged Violations

  • From 2007-17, firm omitted inclusion of mandatory derivatives data in reports.
  • Omissions resulted from four problems with the proprietary reporting software.
  • As of 2015, 25,000-line items reported daily, from 8.3mn underlying positions.
  • Deficiencies were mainly in two designated contract markets: CME, and MGEX.
  • After first two software issues had been corrected, a third glitch was corrected.
  • 2017, bank discovered and reported, a problem with coding of active accounts.
  • Some positions were not correctly aggregated and therefore were not reported.

France – AMF Asset Management

On 27 October, AMF released statement on rules introduced by executive order 2017-1432.

  • Notes overhaul of securitization vehicles and the creation of specialized financing vehicles.
  • Changes exemption from banking monopoly rules to transfer claims to non-French entities.
  • Makes it possible to supplement liquidity risk management tools, creation of FCPE funds.


  • Follows 27 June, AMF issued rules enabling lending made by fund managers.

New Categories

  • Rules changes terms and conditions for investment funds to provide loans to companies.
  • Put specialized funding agencies (organismes de financement spécialisé), under AIFMD.
  • Clarified rules applicable to depositories of securitization and highlights role of manager.
  • Rewrites Monetary Code, Ch. IV, on financing, securitization bodies, specialized finance.


  • Purpose to put specialized funding agencies under AIFMD but also rules for securitization.
  • Clarified responsibilities of managers of depositories used in conjunction with transaction.
  • Funds are able to acquire unmatured receivables from credit institutions per foreign law.

U.S. – SEC Millennium Short Sales

On 31 October, SEC fined Millennium $300k for short sales pre-offerings.

  • Millennium Management LLC agreed to pay over $630,000 to settle SEC charges.

Alleged Violations

  • Company violated the anti-manipulation provisions of the federal securities laws.
  • Firm shorted US stocks in companies which were planning for follow-on offerings.
  • After shorting, the firm then illegally bought the shares in the follow-on offering.
  • By illegally purchasing shares in follow-on offerings, company made $286k profit.
  • Accounts participated in public offerings despite other firm accounts being short.

Rule 105 Violations

  • SEC Rule 105 prohibits short selling an equity security during a restricted period.
  • Restricted period generally for five business days before covered public offerings.
  • Rule bans subsequent purchase of same security as shorted, through an offering.


  • Pay disgorgement $286k, interest of $51k and penalty of $300k for total of $637k.