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GEN 2 Annex 1 Designated investment exchanges

G

Introduction

1.

A designated investment exchange is an exchange appearing in the list of such exchanges in the Glossary.

Benefits of designation

2.

Under certain rules, firms may treat transactions effected on a designated investment exchange in the same way as transactions on RIEs (for example, see 3 CASS 2).

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Criteria for inclusion in the list of designated investment exchanges

3.

Before adding an investment exchange to the list of designated investment exchanges in the Handbook, the FCA4 will comply with all the requirements imposed by the Act in relation to the exercise of its rule-making powers. This will include consulting on the proposed amendment to the list.

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4.

In considering compatibility of the proposed addition with the statutory objectives4, the FCA4 will determine whether the investment exchange provides an appropriate degree of protection for consumers having regard in particular to:

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(1)

the relevant law and practice, including the regulatory framework in which the investment exchange operates, in the country or territory in which the investment exchange's head office is situated and any other relevant country or territory; and

(2)

the rules and practices of the investment exchange.

5.

Only investment exchanges which do not carry on a regulated activity in the United Kingdom and are not regulated markets may be added to the list. This is because an investment exchange carrying on a regulated activity in the United Kingdom will need to apply for recognition as an RIE, or authorisation, and because a regulated market is usually treated in the same way as an RIE in the rules.

Applications to be added to the list of designated investment exchanges

6.

An application to be added to the list should be in writing and delivered to the FCA4 by:

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(1)

post to:

The Financial Conduct Authority4

25 The North Colonnade

Canary Wharf

London

E14 5HS; or

4

(2)

leaving the application at that address.

7.

In support of the application, an investment exchange should provide information on the questions set out in the table below.

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An application will not be considered by the FCA4 until the application fee has been paid. See 12FEES 3.22

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Designated investment exchange questionnaire

1

In what way are members subject to formal supervision by the exchange or another supervisory or regulatory body? Describe how capital resources of members are monitored on an ongoing basis and how this is related to business done.

2

What powers does the exchange or any other supervisory or regulatory body have to intervene in a member's business in the event of misconduct, financial difficulties or otherwise?

3

What are the clearing arrangements of the exchange? How does the exchange ensure performance of a contract between its members? If relevant, what type of contract guarantee is available?

4

How is price information in respect of contracts effected on the exchange disseminated to investors, particularly those investors in the United Kingdom?

5

What are the exchange's arrangements for reporting and recording of transactions effected on the exchange? Please describe.

6

Does the exchange, or any other supervisory or regulatory body, require members to segregate the money and assets of the member's clients from the money and assets of the member? If so, please describe in outline how this operates. If not, are investors protected in any other way in the event of the insolvency of a member or the exchange?

7

Does the exchange have procedures for the investigation of complaints? Please describe what they are.

8

Does the exchange classify the different contracts traded on it in terms of liquidity? Is it possible to identify certain contracts which are more liquid than others and in which a ready market might be considered to exist?