Eligible counterparty

The JC’s Reg and Leg resource™ UK Edition →Go uptown Each of the following is a per se eligible counterparty (including an entity that is not from the UK that is equivalent to any of the following) unless and to the extent it is given a different categorisation under this chapter: An investment firm. a credit institution. an insurance company. a collective investment scheme authorised under the UK provisions which implemented the UCITS Directive or its management company. a pension fund or its management company. another financial institution authorised or regulated under the law of the United Kingdom. a national government or its corresponding office, including a public body that deals with public debt at national level. a central bank. a supranational organisation. Index: Click ᐅ to expand: Regulation Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

When it comes to offering MiFID services, an “eligible counterparty” is the most sophisticated type of client, entitled to the least client protection: No best execution, no nice cosy, comfy retail protections designed for credulous grandparents, nor even protections and enhancements offered to sophisticated professionals trading for big investment management firms.

As the word “counterparty” implies, this categorisation is really only intended for those dealing or making markets. Other playahs. It is not meant for end users, however sophisticated they are. The range of institutions is wide because each of these institution types could potentially carry out a legitimate market-making/intermediary role, but those should only be categorised that way to the extent they actually do. Jane Street is a proprietory trader, yes, but it also acts as a dealer and makes markets. Allianz is an investment manager, but it typically doesn’t make markets. Typically, only broker-dealers get classified as Eligible Counterparties.

“Per se” ECP

To be compared and contrasted with elective eligible counterparty. These matter greatly when categorising clients for MiFID purposes, particularly in the context of best execution.

“Elective” ECP

The famous “elective ECP” categorisation. Many per se professional clients are also per se eligible counterparties — but not all. Those per se professional clients that are not per se eligible counterparties — i.e., that are elective ECPs — can only be treated as ECPs if they have requested this categorisation. Now one might, of course, gently put that idea in such a client’s head: nothing wrong with that. Politely suggesting an elective ECP might wish to think about requesting an upgrade is one thing — but one cannot unilaterally categorise an elective ECP as an ECP without them first requesting it.

• an “elective professional client” (i.e., one can be upgraded from retail to professional) cannot further request to be treated as an ECP.

See also

• Professional clients: per se professional client — elective professional client
• ECPs: per se eligible counterparty — elective eligible counterparty — COBS 1 Annex 1 for disapplication of COBS rules to ECPs
• Retail client: See COBS 3.4: one who is not a professional client or an ECP
• Categorisation decision tree (pdf)