On 5 May 2020, the HM Treasury confirmed that it plans to remove the open access regime for exchange-traded derivatives (ETDs), which is currently within the UK version of the Markets in Financial Instruments Regulation (UK MiFIR (600/2014)).
This follows the HM Treasury’s review of the regime, which it announced on 30 December 2020. HM Treasury has indicated that the reason for the decisions is that these provisions are not relevant in the UK-only context as they were designed to create competition across the EU.
The regime on open access for ETDs is set out in Articles 35 and 36 of UK MiFIR. Article 35 requires a central counterparty (CCP) to accept to clear financial instruments on the request of a trading venue on a non-discriminatory and transparent basis. Article 36 requires a trading venue to provide trade feeds to a CCP on request, on a non-discriminatory and transparent basis, essentially to enable the clearing of financial instruments by that CCP. These provisions allow the trading venue or CCP to reject the request only for certain limited reasons. The provisions also provide for the Financial Conduct Authority to restrict access in certain cases.
The following points may be of interest to exchanges and CCPs operating in the UK and EU:
- This announcement only impacts on UK MiFIR. These provisions still exist in the EU version of MiFIR, and therefore EU exchanges and CCPs may still be subject to open access requests. In addition, Article 38 of the EU version of MiFIR permits open access requests from third country CCPs and trading venues in the event that equivalence decisions are made by the Commission. It will be interesting to see whether the UK will be viewed as equivalent in this area given this regulatory divergence on open access for ETDs.
- HM Treasury has not yet made this change, but has indicated that it intends to when there is parliamentary time to do so. This means that these provisions still form part of UK law.
- HM Treasury has indicated that these changes will only affect ETDs and that open access for over-the-counter (OTC) derivatives and equities will still be supported.
- It is not clear to what extent Article 37 of UK MiFIR, which permits access by CCPs and trading venues to benchmarks, will be affected by this announcement.
The UK has a number of current and planned consultations in the pipeline, including, for example, an HM Treasury consultation on wholesale markets reform due this summer. Stakeholders are encouraged to grasp every opportunity to engage with consultation processes where appropriate.