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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 15:00, 16 December 2014
, 16 December 2014→Commentary
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=====Products which don't trade on a {{fcaprov|regulated market}} or {{fcaprov|MTF}}===== | =====Products which don't trade on a {{fcaprov|regulated market}} or {{fcaprov|MTF}}===== | ||
While at first blush it reads as though {{cobsprov|11.2.26}} should apply to all orders, even those which cannot be traded on a [[regulated market]] in any circumstances (otc swaps for example), the confines of common sense and logic have not entirely escaped the {{tag|European Commission}}. In its "[http://ec.europa.eu/yqol/index.cfm?fuseaction=legislation.showIssue&issueId=69&browse=true&questionId=173 Questions on Single Market Legislation]" resource, it notes: | While at first blush it reads as though {{cobsprov|11.2.26}} should apply to all orders, even those which cannot be traded on a [[regulated market]] in any circumstances (otc swaps for example), the confines of common sense and logic have not entirely escaped the {{tag|European Commission}}. In its "[http://ec.europa.eu/yqol/index.cfm?fuseaction=legislation.showIssue&issueId=69&browse=true&questionId=173 Questions on Single Market Legislation]" resource, it notes: | ||
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{{quote|21.2 CESR considers that on a purposive reading of the "express consent" requirement, an investment firm does not have to obtain express consent from its clients where the relevant instruments are not admitted to trading on a regulated market or MTF.}} | {{quote|21.2 CESR considers that on a purposive reading of the "express consent" requirement, an investment firm does not have to obtain express consent from its clients where the relevant instruments are not admitted to trading on a regulated market or MTF.}} | ||
=====Products which trade {{tag|OTC}} - can the transaction a consent to execute off {{tag|regulated exchange}}?===== | |||
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 | |||
*"'''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. | |||
=====Consent and Express Consent===== | |||
From the "[[Media:CESR Best Execution QA 07_320.pdf|Best Execution under MiFID]]" Q&A document: | |||
{{quote|'''''Q21 What is the difference between "consent" and "express consent"?'''''<br> | |||
21.1 Where {{tag|MiFID}} requires "prior express consent", CESR considers that this entails '''an actual demonstration of consent by the client which may be provided by signature in writing or an equivalent means''' (electronic signature), by a click on a web page or orally by telephone or in person, with appropriate record keeping in each case. <br>}} | |||
{{cobsanatomy}} | {{cobsanatomy}} | ||