MiFID II checklist

Since the announcement of MiFID II there has been uncertainty around whether US DEA Providers (firms that provide Direct Electronic Access to European trading venues) and US DEA Users (those firms that access European trading venues through DEA Providers) need to be authorized as a result of new rules under MiFID II.

The European Securities and Markets Authority (ESMA) has now provided clarity for these firms in Q&As released on November 15, 2017. In these Q&As, ESMA states, “MiFID II provides that trading venues should only permit a member or participant to provide DEA ‘if they are investment firms authorised under [MiFID II]”.

As a result, DEA Providers that are not currently authorized in Europe will need to seek authorization from a European Economic Area (EEA) Member State. These firms should stop providing DEA access to European trading venues beginning January 3, 2018 until the appropriate authorization has been received.

Fortunately, DEA Users will not need to seek authorization simply as a result of their use of DEA. However, DEA Users will need to consider their location, and the location of their activities in order to determine whether authorization in Europe is needed. For example, a US based DEA User who does no other regulated business in Europe will not need MiFID II authorization. Of course, European DEA Users are most likely already authorized under MiFID.

UK Authorization Process

DEA Providers that seek authorization from the Financial Conduct Authority (FCA) in the UK will need to submit a MiFID authorization application and are likely to have a minimum capital requirement of €730k. DEA Users that are undertaking regulated activities in Europe will also need to submit a MiFID authorization application and will be subject to a minimum capital requirement dependent on the firm’s activities (e.g. whether they are dealing as principal or receiving and transmitting orders).

The FCA authorization process can take between 6 to 12 months so those firms who were waiting for clarity, it has come too late. You need to take action now. Bovill can help determine whether authorization is needed and work with your firm to get any necessary authorizations.

For more information on Bovill’s regulatory compliance consulting services, to request a proposal for your specific compliance needs, or to be added to our distribution list for regulatory updates, please contact us at 312-600-9992 or at info@bovill.com.

Download the article  ESMA Clarifies MiFID II Authorization Requirements for DEA Firms

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