Post-Brexit - 3rd Country Rules Impact UK Firms

On the 31 January 2020 the UK left the EU and started an eleven month transition period. In this period the majority of EU regulations remained in force to allow for negotiations to continue and for businesses to further prepare for what lies ahead. At the end of the transition period the UK will be treated as a ‘third country’ to the EU, like every other non-EEA country.

For the UK financial services industry, this might imply there will be a bonfire of red tape and the burden of MIFID2 reporting will be lifted. However, this will not be the case and, if anything, there will be extra work required to change the reporting of who, what and where of transactions. And, as the UK is such a major force in the financial services sector, changes will need to be made to EU firm’s reporting processes as well.

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Trading Venues

One of the major impacts of being a Third Country is the extra data required for transaction reporting. MIFIR Article 26 states that Trading Venues are responsible for transaction reporting on behalf of third country firms. This means that each EU venue will need to be provided with Personally Identifiable Information (PII) from their UK members. The converse is also true in that UK trading venues will need to be supplied with PII data from EU members. With each venue having a different data format, this is not a trivial task for venue users.

The FCA market watch 59 highlighted that some firms are having difficulty managing PII data under the current circumstances, so the upcoming changes will provide an opportunity to make this important part of trade surveillance more robust.

Another point to bear in mind is that as a Third Country the current identifiers used for UK citizens may need to be revised. Under the Article 6 of MiFiD2 RTS 22 https://ec.europa.eu/transparency/regdoc/rep/3/2016/EN/3-2016-4733-EN-F1-1.PDF , UK nationals will be treated as citizens of Third Country and they will need to supply their Passport numbers as the currently required National Insurance number will no longer be valid for reporting purposes. The same could well apply for EU citizens reporting to the FCA depending on the path taken.

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