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Client consent to execution policy and execution of orders outside a regulated market or MTF - COBS Provision: Difference between revisions
Client consent to execution policy and execution of orders outside a regulated market or MTF - COBS Provision (view source)
Revision as of 17:52, 16 December 2014
, 16 December 2014→Products which trade {{tag|OTC}} - can the transaction a consent to execute off {{tag|regulated market}}?
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=====Products which trade {{tag|OTC}} - can the transaction a consent to execute off {{tag|regulated market}}?===== | =====Products which trade {{tag|OTC}} - can the transaction a consent to execute off {{tag|regulated market}}?===== | ||
In order to comply with this rule, the safest course is to ask clients for a generic permission to execute trades off {{fcaprov|regulated markets}} or {{fcaprov|MTFs}} across the board. Some clients might object, however, to such a wide-ranging permission. | |||
You can of course ask instead for consent "in respect of individual transactions" (per the wording of {{cobsprov|11.2.26}}). This might seem unfeasible, but consider that for many products that might oherwise be caught (especially OTC transactions) the very act of transacting in a certain way - if that way necessarily entails trading outside a {{fcaprov|regulated market}} or {{fcaprov|MTF}} - amounts to express consent to trade in that way. | |||
And that is actually a pretty fundamental get-out. | |||
There is an unspoken distrinction in the {{tag|COBS}} rules between: | |||
*"'''agency'''" or "'''quasi-agency'''" orders''': orders whereby a broker receives instructions from client and then turns around and interacts with third party venues (including {{fcaprov|regulated market}}s, {{fcaprov|MTF}}s but also unregulated venues like systematic internalisers), without involvement of the client, to fill that order); and | *"'''agency'''" or "'''quasi-agency'''" orders''': orders whereby a broker receives instructions from client and then turns around and interacts with third party venues (including {{fcaprov|regulated market}}s, {{fcaprov|MTF}}s but also unregulated venues like systematic internalisers), without involvement of the client, to fill that order); and | ||
*"'''bilateral'''" transactions where client trades with the broker directly in a principal capacity and any transaction between the broker and the market is by way of {{tag|hedge}} and not fulfillment of the customer's order. These are things like OTC derivatives under an {{isdama}}; spot FX trades and so on. | *"'''bilateral'''" transactions where client trades with the broker directly in a principal capacity and any transaction between the broker and the market is by way of {{tag|hedge}} and not fulfillment of the customer's order. These are things like OTC derivatives under an {{isdama}}; spot FX trades and so on. | ||