Update

European Regulation

	The Clearing and Settlement Code of Conduct

The FOA has urged the EU Commission to consider extending the Code to cover listed derivatives:

•  to facilitate more competition in the provision of central clearing services;

•  to secure more competition between exchanges and alternative execution platforms (in line with the objectives that stand behind the deconcentration provisions of MiFID);

•  to introduce checks and balances to ensure fair and economic pricing on clearing services;

•  to enable market participants to have greater choice in the provision of clearing services.

The FOA recognises fully the need for a proportionate approach to be adopted to this issue which does not impair the ability of exchanges to develop structures and processes that sustain their international competitiveness and enable them to enhance operational efficiencies and productivity.

At the last meeting of the Monitoring Group, the Commission emphasised the priority target of delivering the Code in the context of clearing and settling cash equities and for sufficient evidence of market failure to justify any extension to the Code or other form of “public intervention” as regards other asset classes.

Any member wishing to become involved in this issue or who has evidence of market problems / inefficiencies caused by in-house clearing or who is looking to join the small advisory group of practitioners that has been set up to help formulate the approach and direction of the FOA on this issue should contact Anthony Belchambers .

With regard to the intention of ICE Futures to transfer clearing from LCH.Clearnet to ICE Clear (Europe) Ltd, the FOA is concerned to ensure that clearing transfers of this nature will not have an adverse impact on pricing or risk, particularly in relation to the default fund, or generate any of the problems referred to above. The FOA is not, on the other hand, seeking to prevent or object to the recognition of ICE Clear (Europe) Ltd as a UK clearing house.

	Legal Opinion on the Scope of Foreign Exchange

The FOA commissioned a legal opinion on the extent to which foreign exchange dealings in spot, forward, futures and contracts for differences do or do not fall within the scope of the MiFID Directive and the way in which that directive has been implemented in the UK. That opinion – which was first posted on the FOA website in draft form – has been amended to reflect a number of valid points made by a few member firms on the text and is now on the website in final form.

	EU-US Coalition on Financial Regulation

As members may be aware, it is expected that the publication of the SEC's concept release on how it is going to facilitate exemptive relief for non-US broker-dealers and regulatory recognition for non-US exchanges to undertake US customer business (essentially wholesale business) is based on the observance of home-state licensing and regulatory requirements is likely to be delayed until April. Disappointing and worrisome delay, and one which may be exacerbated considerably by the US election programme with the departure of Chairman Cox towards the end of the year.

For its part, the Coalition had engaged in a number of rounds of consultation on its draft Report and now expects to publish it at the end of February / early March. Any member who has not seen a copy of the latest draft, but would like to have the opportunity of commenting on it should contact Sally Hughes .