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COBS 3.6 Eligible counterparties

COBS 3.6.1RRP

  1. (1)

    An eligible counterparty is a client that is either a per se eligible counterparty or an elective eligible counterparty.

  2. (2)

    A1 client can only be an eligible counterparty in relation to eligible counterparty business (PRIN 1 Annex 1 R is an exception to this).1

[Note: article 24(1) of MiFID]

Per se eligible counterparties

COBS 3.6.2RRP

Each of the following is a per se eligible counterparty (including an entity that is not from an EEA State3 that is equivalent to any of the following) unless and to the extent it is given a different categorisation under this chapter:

  1. (1)

    an investment firm;

  2. (2)

    a credit institution;

  3. (3)

    an insurance company;

  4. (4)

    a collective investment scheme authorised under the UCITS Directive or its management company;

  5. (5)

    a pension fund or its management company;

  6. (6)

    another financial institution authorised or regulated under EU2 legislation or the national law of an EEA State;

    2
  7. (7)

    an undertaking exempted from the application of MiFID under either Article 2(1)(k) (certain own account dealers in commodities or commodity derivatives) or Article 2(1)(l) (locals) of that directive;

  8. (8)

    a national government or its corresponding office, including a public body that deals with the public debt;

  9. (9)

    a central bank;

  10. (10)

    a supranational organisation.

[Note: first paragraph of article 24(2) and first paragraph of article 24(4) of MiFID]

COBS 3.6.3GRP

For the purpose of COBS 3.6.2 R (6), a financial institution includes regulated institutions in the securities, banking and insurance sectors.

Elective eligible counterparties

COBS 3.6.4RRP

A firm may treat a client as an elective eligible counterparty if:

  1. (1)

    the client is an undertaking and:

    1. (a)

      is a per se professional client (except for a client that is only a per se professional client because it is an institutional investor under COBS 3.5.2 R (5)) and, in relation to business other than MiFID or equivalent third country business:1

      1. (i)

        is a body corporate (including a limited liability partnership) which has (or any of whose holding companies or subsidiaries has) called up share capital of at least £10 million (or its equivalent in any other currency at the relevant time); or1

      2. (ii)

        meets the criteria in the rule on meeting two quantitative tests (COBS 3.5.2 R (3)(b)); or1

    2. (b)

      requests such categorisation and is an elective professional client, but only in respect of the services or transactions for which it could be treated as a professional client; and

  2. (2)

    the firm has, in relation to MiFID or equivalent third country business, obtained express confirmation from the prospective counterparty that it agrees to be treated as an eligible counterparty.

[Note: article 24(3) and the second paragraph of article 24(4) of MiFID and article 50(1) of the MiFID implementing Directive]

COBS 3.6.5GRP

The categories of elective eligible counterparties include an equivalent undertaking that is not from an EEA State provided the above conditions and requirements are satisfied.

COBS 3.6.6RRP

A firm may obtain a prospective counterparty's confirmation that it agrees to be treated as an eligible counterparty either in the form of a general agreement or in respect of each individual transaction.

[Note: second paragraph of article 24(3) of MiFID]

Client and firm located in different jurisdictions

COBS 3.6.7RRP

In the case of MiFID or equivalent third country business, in the event of a transaction where the prospective counterparties are located in different EEA States, the firm shall defer to the status of the other undertaking as determined by the law or measures of the EEA State in which that undertaking is established.

[Note: first paragraph of article 24(3) of MiFID]