The FCA has published a Dear CEO letter on payment for order flow (PFOF).
The Dear CEO letter follows the FCA’s Market Watch 51 on PFOF, which we blogged in September last year (here).
In the Dear CEO letter, the FCA reiterates that firms that continue to charge PFOF will breach the new standards implemented in MiFID II, reminding firms that they must take action to ensure compliance and warn against any attempted models that seek to avoid these rules.
The FCA states that firms must take action now in order to comply with the requirements. The FCA warns that this will be a priority area of supervisory focus after January. The regulator also states that it will scrutinise any arrangements that seek to circumvent the rules, for example relying on contractual arrangements that do not reflect the economic reality of the relationship.
In addition, the FCA states that any market makers who are approached by firms with proposals which attempt to circumvent the requirements should not engage in such arrangements and should make the FCA aware of these attempts.
View FCA “Dear CEO” letter on payment for order flow, 13 December 2017