Related provisions for SUP 15.3.34

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SUP 15.3.18GRP
In determining whether a matter is significant, a firm should have regard to:(1) the size of any monetary loss or potential monetary loss to itself or its customers (either in terms of a single incident or group of similar or related incidents);(2) the risk of reputational loss to the firm; and(3) whether the incident or a pattern of incidents reflects weaknesses in the firm's internal controls.

Schedule to the Recognition Requirements Regulations, paragraphs 3 – 3H4

Paragraph 3 – Systems and controls4


The [UK RIE] must ensure that the systems and controls, including procedures and arrangements,4 used in the performance of its functions and the functions of the trading venues it operates are adequate, effective4 and appropriate for the scale and nature of its business.


Sub-paragraph (1) applies in particular to systems and controls concerning -


the transmission of information;


the assessment, mitigation and management of risks to the performance of the [UK RIE'srelevant functions];


the effecting and monitoring of transactions on the [UK RIE];


the technical operation of the [UK RIE], including contingency arrangements for disruption to its facilities;


the operation of the arrangements mentioned in paragraph 4(2)(d); and


(where relevant) the safeguarding and administration of assets belonging to users of the [UK RIE's] facilities.


the resilience of its trading systems;

4[Note:MiFID RTS 7 contains requirements on the resilience of trading systems operated by trading venues that enable algorithmic trading]


the ability to have sufficient capacity to deal with peak order and message volumes;

4[Note:MiFID RTS 7 contains requirements on the adequacy of capacity of trading systems operated by trading venues that enable algorithmic trading]


the ability to ensure orderly trading under conditions of severe market stress;


the effectiveness of business continuity arrangements to ensure the continuity of the [UK RIE’s] services if there is any failure of its trading systems including the testing of the [UK RIE’s] systems and controls;


the ability to reject orders that exceed predetermined volume or price thresholds or which are clearly erroneous;


the ability to ensure algorithmic trading systems cannot create or contribute to disorderly trading conditions on trading venues operated by the [UK RIE];


the ability to ensure disorderly trading conditions which arise from the use of algorithmic trading systems, including systems to limit the ratio of unexecuted orders to transactions that may be entered into the [UK RIE’s] trading system by a member or participant are capable of being managed;

[Note:MiFID RTS 9 contains requirements on the ratio of unexecuted orders to transactions to be taken into account by a trading venue that operates electronic continuous auction order book, quote-driven or hybrid trading systems]


the ability to ensure the flow of orders is able to be slowed down if there is a risk of system capacity being reached;


the ability to limit and enforce the minimum tick size which may be executed on its trading venues; and


the requirement for members and participants to carry out appropriate testing of algorithms.

4[Note:MiFID RTS 7 contains requirements on the appropriate testing of algorithms to ensure that trading systems, when they enable algorithmic trading, cannot create or contribute to disorderly trading conditions]


For the purposes of sub-paragraph 2(c), the [UK RIE] must -


establish and maintain effective arrangements and procedures including the necessary resource for the regular monitoring of the compliance by members or participants with its rules; and


monitor orders sent including cancellations and the transactions undertaken by its members or participants under its systems in order to identify infringements of those rules, disorderly trading conditions or conduct that may indicate behavior that is prohibited under the market abuse regulation or system disruptions in relation to a financial instrument.


For the purpose of sub-paragraph (2)(o) the [UK RIE] must provide environments to facilitate such testing.


The [UK RIE] must be adequately equipped to manage the risks to which it is exposed, to implement appropriate arrangements and systems to identify all significant risks to its operation, and to put in place effective measures to mitigate those risks.

4Paragraph 3A – Market making arrangements


The [UK RIE] must -


have written agreements with all investment firms pursuing a market making strategy on trading venues operated by it (“market making agreements”);


have schemes, appropriate to the nature and scale of a trading venue, to ensure that a sufficient number of investment firms enter into such agreements which require them to post firm quotes at competitive prices with the result of providing liquidity to the market on a regular and predictable basis;


monitor and enforce compliance with the market making agreements;


inform the FCA of the content of its market making agreements; and


provide the FCA with any information it requests which is necessary for the FCA to satisfy itself that the market making agreements comply with paragraphs (c) and (d) of this sub-paragraph and sub-paragraph 2.


A market making agreement must specify-


the obligations of the investment firm in relation to the provision of liquidity;


where applicable, any obligations arising from the participation in a scheme mentioned in sub-paragraph (1)(b);


any incentives in terms of rebates or otherwise offered by the [UK RIE] to the investment firm in order for it to provide liquidity to the market on a regular and predictable basis; and


where applicable, any other rights accruing to the investment firm as a result of participation in the scheme referred to in sub-paragraph (1)(b).


For the purposes of this paragraph, an investment firm pursues a market making strategy if -


the firm is a member or participant of one or more trading venues;


the firm’s strategy, when dealing on own account, involves posting firm, simultaneous two-way quotes of comparable size at competitive prices relating to one or more financial instruments on a single trading venue, across different trading venues; and


the result is providing liquidity on a regular and frequent basis to the overall market.

4Paragraph 3B – Halting trading


The [UK RIE] must be able to -


temporarily halt or constrain trading on any trading venue operated by it if there is a significant price movement in a financial instrument on such a trading venue or a related trading venue during a short period; and


in exceptional cases be able to cancel, vary, or correct any transaction.


For the purposes of sub-paragraph (1), the [UK RIE] must ensure that the parameters for halting trading are appropriately calibrated in a way which takes into account -


the liquidity of different asset classes and subclasses;


the nature of the trading venue market model; and


the types of users,

4to ensure the parameters are sufficient to avoid significant disruptions to the orderliness of trading.


The [UK RIE] must report the parameters mentioned in sub-paragraph (2) and any material changes to those parameters to the FCA in a format to be specified by the FCA.


If a trading venue operated by the [UK RIE] is material in terms of liquidity of the trading of a financial instrument and it halts trading in the United Kingdom6 in that instrument it must have systems and procedures in place to ensure that it notifies the FCA.

4[Note:MiFID RTS 12 contains requirements for when a regulated market is material in terms of liquidity in a financial instrument for purposes of trading halt notifications]

4Paragraph 3C – Direct electronic access

4Where the [UK RIE] permits direct electronic access to a trading venue it operates, it must -



ensure that a member of, or participant in that trading venue is only permitted to provide direct electronic access to the venue if the member or participant -


an investment firm which has permission under Part 4A of the Act to carry on a regulated activity which is any of the investment services or activities;6


a qualifying credit institution that has Part 4A permission to carry on the regulated activity of accepting deposits;6


is a person who falls within regulation 30(1A) of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 and has permission under Part 4A of the Act to carry on a regulated activity which is any of the investment services or activities;6


is a third country firm providing the direct electronic access in the course of exercising rights under Article 46.1 (general provisions) 6of the markets in financial instruments regulation;


is a third country firm and the provision of the direct electronic access by that firm is subject to the exclusion in Article 72 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; or


is a third country firm which does not come within paragraph (iv) or (v) and is otherwise permitted to provide the direct electronic access under the Act;


ensure that appropriate criteria are set and applied for the suitability of persons to whom direct electronic access services may be provided;


ensure that a member of, or participant in, the trading venue retains responsibility for adherence to the requirements of any provisions of the law of the United Kingdom relied on by the United Kingdom before IP completion day to implement6 the markets in financial instruments directive in respect of orders and trades executed using the direct electronic access service, as those provisions have effect on IP completion day, in the case of rules made by the FCA under the Act, and as amended from time to time, in all other cases6;


set appropriate standards regarding risk controls and thresholds on trading through direct electronic access;


be able to distinguish and if necessary stop orders or trading on that trading venue by a person using direct electronic access separately from -


other orders; or


trading by the member or participant providing the direct electronic access; and


have arrangements in place to suspend or terminate the provision to a client of direct electronic access to that trading venue by a member of, or participant in, the trading venue in the case of non-compliance with this paragraph.

4[Note:MiFID RTS 7 contains requirements on direct electronic access permitted through a trading venue’s systems]

4Paragraph 3D – Co-location services


The [UK RIE’s] rules on colocation services must be transparent, fair and nondiscriminatory.

4[Note:MiFID RTS 10 contains requirements to ensure co-location services are transparent, fair and non-discriminatory]

4Paragraph 3E – Fee structures


The [UK RIE’s] fee structure, for all fees it charges including execution fees and ancillary fees and rebates it grants, must -


be transparent, fair and non-discriminatory;

4[Note:MiFID RTS 10 contains requirements to ensure fee structures are transparent, fair and non-discriminatory]


not create incentives to place, modify or cancel orders, or execute transactions, in a way which contributes to disorderly trading conditions or market abuse; and

4[Note:MiFID RTS 10 contains requirements concerning prohibited fee structures]


impose market making obligations in individual shares or suitable baskets of shares for any rebates that are granted.


Nothing in sub-paragraph (1) prevents the [UK RIE] from -


adjusting its fees for cancelled orders according to the length of time for which the order was maintained;


calibrating its fees to each financial instrument to which they apply;


imposing a higher fee -


for placing an order which is cancelled than an order which is executed;


on participants placing a high ratio of cancelled orders to executed orders; or


on a person operating a high-frequency algorithmic trading technique,

4in order to reflect the additional burden on system capacity.

4Paragraph 3F – Algorithmic trading


The [UK RIE] must require members of and participants in trading venues operated by it to flag orders generated by algorithmic trading in order for it to be able to identify the -


the different algorithms used for the creation of orders; and


the persons initiating those orders.

4Paragraph 3G – Tick size regimes


Subject to paragraph 1A, the8 [UK RIE] must adopt tick size regimes in respect of trading venues operated by it in -


shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments traded on each trading venue; and

4[Note:MiFID RTS 11 contains requirements on the tick size regime for shares, depositary receipts, exchange traded funds and certificates5]


any financial instrument for which technical standards are adopted by FCA under paragraphs 24 and 25 of Part 2 of Schedule 3 to6 the markets in financial instruments regulation8 which is traded on that trading venue.

[Note:MiFID RTS 11]


The application of tick sizes shall not prevent the [UK RIE] from matching orders that are large in scale (as determined in accordance with Article 4 of the markets in financial instruments regulation) at the mid-point within the current bid and offer prices.

[Note:MiFID RTS 11]

4 (2)

The tick size regime must -


be calibrated to reflect the liquidity profile of the financial instrument in different markets and the average bid-ask spread taking into account desirability of enabling reasonably stable prices without unduly constraining further narrowing of spreads; and


adapt the tick size for each financial instrument appropriately.


The tick size regime must comply with Commission Delegated Regulation (EU) 2017/588 of 14 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the tick size regime for shares, depositary receipts and exchange-traded funds6.

4[Note:MiFID RTS 11]

4Paragraph 3H – Syncronisation of business clocks


The [UK RIE] must synchronise the business clocks it uses to record the date and time of any reportable event in accordance with Commission Delegated Regulation (EU) 2017/574 of 7 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the level of accuracy of business clocks6.

4[Note:MiFID RTS 25]

LR 8.7.8RRP
A sponsor must notify the FCA in writing as soon as possible if:(1) 8(a) 8the sponsor ceases to satisfy the criteria for approval as a sponsor set out in LR 8.6.5 R or becomes aware of any matter which, in its reasonable opinion, would be relevant to the FCA in considering whether the sponsor continues to comply with LR 8.6.6 R; or(b) 8the sponsor becomes aware of any fact or circumstance relating to the sponsor or any of its employees engaged in the provision of sponsor services
CASS 6.6.58GRP
Firms are reminded that the auditor of the firm has to confirm in the report submitted to the FCA under SUP 3.10 (Duties of auditors: notification and report on client assets) that the firm has maintained systems adequate to enable it to comply with the custody rules.
SYSC 13.4.1GRP
Under Principle 11 and SUP 15.3.1 R, a firm must notify the FCA1 immediately of any operational risk matter of which the FCA1 would reasonably expect notice. SUP 15.3.8 G provides guidance on the occurrences that this requirement covers, which include a significant failure in systems and controls and a significant operational loss.
REC 5.2.14GRP

Information and supporting documentation (see REC 5.2.4 G).


Details of the applicant's constitution, structure and ownership, including its memorandum and articles of association (or similar or analogous documents ) and any agreements between the applicant, its owners or other persons relating to its constitution or governance (if not contained in the information listed in REC 5.2.3A G)1. An applicant for RAP status must provide details of the relationship between the governance arrangements in place for the UK RIE and the RAP.76



Details of all business to be conducted by the applicant, whether or not a regulated activity (if not contained in the information listed in REC 5.2.3A G)1.


Details of the facilities which the applicant plans to operate, including details of the trading platform or (for a RAP) auction platform,7 settlement arrangements, clearing facilitation services5 and custody services which it plans to supply. An applicant for RAP status must provide details on the relationship between the auction platform and any secondary market in emissions auction products which it operates or plans to operate.76



Copies of the last three annual reports and accounts and, for the current financial year, quarterly management accounts.


Details of its business plan for the first three years of operation as a UK recognised body (if not contained in the information listed in REC 5.2.3A G)1.


A full organisation chart and a list of the posts to be held by key individuals (with details of the duties and responsibilities) and the names of the persons proposed for these appointments when these names are available (if not contained in the information listed in REC 5.2.3A G)1.


Details of its auditors, bankers, solicitors and any persons providing corporate finance advice or similar services (such as reporting accountants) to the applicant.


Details of any relevant functions to be outsourced or delegated, with copies of relevant agreements.


Details of information technology systems and of arrangements for their supply, management, maintenance and upgrading, and security.


Details of all plans to minimise disruption to operation of its facilities in the event of the failure of its information technology systems.


Details of internal systems for financial control, arrangements for risk management and insurance arrangements to cover operational and other risks.


Details of its arrangements for managing any counterparty risks.



Details of internal arrangements to safeguard confidential or privileged information and for handling conflicts of interest.


Details of arrangements for complying with the notification rules and other requirements to supply information to the FCA5.



Details of the arrangements to be made for monitoring and enforcing compliance with its rules and with its clearing, settlement and default arrangements.


A summary of the legal due diligence carried out in relation to ascertaining the enforceability of its rules (including default rules) and the results and conclusions reached.



Details of the procedures to be followed for declaring a member in default, and for taking action after that event to close out positions, protect the interests of other members and enforce its default rules.


Details of membership selection criteria, rules and procedures, including (for a RAP) details of how the rules of the UK RIE will change in order to reflect RAP status7.



Details of arrangements for recording transactions effected by, or cleared through, its facilities.


Details of arrangements for detecting financial crime and market abuse , including arrangements for complying with money laundering law.


Details of criteria, rules and arrangements for selecting specified investments to be admitted to trading on (or cleared by) an RIE and, where relevant, details of how information regarding specified investments will be disseminated to users of its facilities.



Details of arrangements for cooperating with the FCA5 and other appropriate authorities, including draft memoranda of understanding or letters.



Details of the procedures and arrangements for making and amending rules, including arrangements for consulting on rule changes.


Details of disciplinary and appeal procedures, and of the arrangements for investigating complaints.

A firm must have systems and procedures to notify the FCA if:(1) an OTF operated by it is material in terms of the liquidity of the trading of a financial instrument3; and(2) trading is halted in that instrument.[Note: article 48(5) of MiFID]
SUP 3.7.2GRP
A firm should consider whether it should notify the FCA and the PRA (if it is a PRA-authorisedfirm) or the FCA (in all other cases) under Principle 11 if:(1) the firm expects or knows its auditor will qualify his report on the audited annual financial statements or add an explanatory paragraph; or (2) the firm receives a written communication from its auditor commenting on internal controls (see also SUP 15.3).