Compliance/Regulation

Role of the Name-Passing Broker

The main business of an inter-dealer broker (broker) is to provide access to over-the-counter and/or exchange traded pools of liquidity, across a full range of asset classes and their associated derivatives.  Typically, brokerage activity takes place in the wholesale financial markets, which includes cash deposits, financial derivatives, securities, equities, commodities, energy and credit.

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Definition of Limited Licence and Limited Activity

The FCA Handbook defines our members' activities as:

Types of investment firm: Limited activity firms

A limited activity firm means (as specified by Article 20(3) of the Capital Adequacy Directive (Exemptions from operational risk)) a CAD investment firm that satisfies the following conditions:

(1) it meets the criteria in (a) or the criteria in (b):

(a) it deals on own account only:

(i) for the purpose of fulfilling or executing a client order; or
(ii) for the purpose of gaining entrance to a clearing and settlement system or a recognised investment exchange or designated investment exchange when acting in an agency capacity or executing a client order; or

(b) it satisfies the following conditions:

(i) it does not hold client money or securities in relation to investment services that it provides and is not authorised to do so;
(ii) the only investment service it undertakes is dealing on own account;
(iii) it has no external customers in relation to investment services it provides; and
(iv) the execution and settlement of its transactions in relation to investment services it provides takes place under the responsibility of a clearing institution and are guaranteed by that clearing institution;

(2) (in the case of a CAD investment firm that is a BIPRU investment firm) its base capital resources requirement is €730,000;

(3) (in the case of a CAD investment firm that is an EEA firm) it is subject to the CRD implementation measures of its Home State for Article 9 of the Capital Adequacy Directive (Initial capital requirement of €730,000); and

(4) (in the case of any other CAD investment firm) its base capital resources requirement would be €730,000 if it had been a BIPRU investment firm on the basis of the assumptions in BIPRU 1.1.14 R (3)(a) and BIPRU 1.1.14 R (3)(b).

Types of investment firm: Limited licence firms

A limited licence firm means (as specified by Article 20(2) of the Capital Adequacy Directive (Exemptions from operational risk)) a CAD investment firm that is not authorised to:
(1) deal on own account; or

(2) provide the investment services of underwriting or placing financial instruments (as referred to in point 6 of Section A of Annex I of MiFID) on a firm commitment basis.