Schedule 3, paragraph 1(17)

After paragraph 9A of the Schedule insert— An exchange must have non-discretionary rules for the execution of orders on a multilateral trading facility operated by it. An exchange must not on a multilateral trading facility operated by it— execute any client orders against its proprietary capital; or engage in matched principal trading. The rules of the exchange about access to, or membership of, a multilateral trading facility operated by it must permit the exchange to give access to or admit to membership (as the case may be) only to— an investment firm authorised under Article 5 of the markets in financial instruments directive; a credit institution authorised in accordance with the capital requirements directive; or a person who— is of sufficient good repute; has a sufficient level of trading ability, competence and experience; where applicable, has adequate organisational arrangements; and has sufficient resources for the role it is to perform, taking account of the financial arrangements the exchange has established in order to guarantee the adequate settlement of transactions. The rules of the exchange must provide that where it, without obtaining the consent of the issuer, admits to trading on a multilateral trading facility operated by it a transferable security which has been admitted to trading on a regulated market, the exchange may not require the issuer of that security to demonstrate compliance with the disclosure obligations. The exchange must maintain arrangements to provide sufficient publicly available information (or satisfy itself that sufficient information is publicly available) to enable users of a multilateral trading facility operated by it to form investment judgements, taking into account both the nature of the users and the types of instruments traded. In this paragraph, “the disclosure obligations” has the same meaning as in paragraph 9ZB. An exchange operating a multilateral trading facility which has registered that facility as an SME growth market in accordance with Article 33 of the markets in financial instruments directive (an “exchange-operated SME growth market”) must comply with rules made by FCA for the purposes of this paragraph. An exchange-operated SME growth market must not admit to trading a financial instrument which is already admitted to trading on another SME growth market unless the issuer of the instrument has been informed of the proposed admission to trading and has not objected. Where an exchange-operated SME growth market exchange admits a financial instrument to trading in the circumstances of sub-paragraph (2), that exchange-operated SME growth market may not require the issuer of the financial instrument to demonstrate compliance with— any obligation relating to corporate governance, or the disclosure obligations. In this paragraph, “the disclosure obligations” has the same meaning as in paragraph 9ZB. An exchange operating an organised trading facility must— execute orders on that facility on a discretionary basis in accordance with sub-paragraph (4); not execute any client orders on that facility against its proprietary capital or the proprietary capital of any entity that is part of the same group or legal person as the exchange unless in accordance with sub-paragraph (2); not operate a systematic internaliser within the same legal entity; ensure that the organised trading facility does not connect with a systematic internaliser in a way which enables orders in an organised trading facility and orders or quotes in a systematic internaliser to interact; and ensure that the organised trading facility does not connect with another organised trading facility in a way which enables orders in different organised trading facilities to interact. An exchange may only engage in— matched principal trading on an organised trading facility operated by it in respect of— where the client has consented to that; or bonds, structured finance products, emission allowances, and derivatives which have not been declared subject to the clearing obligation in accordance with Article 5 of the EMIR regulation , dealing on own account on an organised trading facility operated by it, otherwise than in accordance with paragraph (a), in respect of sovereign debt instruments for which there is not a liquid market. If the exchange engages in matched principal trading in accordance with sub-paragraph (2)(a) it must establish arrangements to ensure compliance with the definition of matched principal trading in Article 4.1.38 of the markets in financial instruments directive. The discretion which the exchange must exercise in executing a client order may only be the discretion mentioned in sub-paragraph (5) or in sub-paragraph (6) or both. The first discretion is whether to place or retract an order on the organised trading facility. The second discretion is whether to match a specific client order with other orders available on the organised trading facility at a given time, provided the exercise of such discretion is in compliance with specific instructions received from the client and in accordance with the exchange's obligations under Article 27 of the markets in financial instruments directive. Where the organised trading facility crosses client orders the exchange may decide if, when and how much of two or more orders it wants to match within the system. Subject to the requirements of this paragraph, with regard to a system that arranges transactions in non-equities, the exchange may facilitate negotiation between clients so as to bring together two or more potentially comparable trading interests in a transaction. The exchange must comply with rules made by the FCA as to how Articles 24, 25, 27 and 28 of the markets in financial instruments directive apply to its operation of an organised trading facility. Nothing in this paragraph prevents an exchange from engaging an investment firm to carry out market making on an independent basis on an organised trading facility operated by the exchange provided the investment firm does not have close links with the exchange. In this paragraph— “close links” has the meaning given in Article 4.1.35 of the markets in financial instruments directive; “investment firm” has the meaning given in Article 4.1.1 of the markets in financial instruments directive; “non-equities” means bonds, structured finance products, emission allowances and derivatives traded on a trading venue to which Article 8(1) of the markets in financial instrument regulation applies. The rules of the exchange must provide that where it, without obtaining the consent of the issuer, admits to trading on an organised trading facility operated by it a transferable security which has been admitted to trading on a regulated market, the exchange may not require the issuer of that security to demonstrate compliance with the disclosure obligations. The exchange must maintain arrangements to provide sufficient publicly available information (or satisfy itself that sufficient information is publicly available) to enable users of an organised trading facility operated by it to form investment judgements, taking into account both the nature of the users and the types of instruments traded. In this paragraph, “the disclosure obligations” has the same meaning as in paragraph 9ZB. An exchange must, when requested to do so, provide the FCA with a detailed explanation in respect of an organised trading facility operated by it, or such a facility it proposes to operate, of— why the organised trading facility does not correspond to and cannot operate as a multilateral trading facility, a regulated market or a systematic internaliser; how discretion will be exercised in executing client orders, and in particular when an order to the organised trading facility may be retracted and when and how two or more client orders will be matched within the facility; and its use of matched principal trading. Any information required under sub-paragraph (1) must be provided to the FCA in the manner which it considers appropriate. An exchange providing data reporting services must comply with Title V of the markets in financial instruments directive.

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Source: legislation.gov.uk · retrieved 2026-09-04