Section 5:26 Subsection 1 of the FSA states the prohibition to operate a market in financial instruments without a recognition. A relevant question is: when do activities of trading platforms established abroad qualify as holding a market in financial instruments in the Netherlands? To answer this question the AFM assesses if the trading platform is active in the Netherlands.
Previously the AFM qualified the activities in the Netherlands of a foreign trading platform by using the criterion ‘the placing of trading screens ’ by this trading platform. Due to the increased role of the internet in the access to a trading platform, this criterion is no longer appropriate. The AFM therefore developed new assessment criteria.
The AFM qualifies a trading platform, established abroad, as being active in the Netherlands if both of the following criteria are met:
- The trading platform offers direct access (without making use of a local broker) to Dutch parties (Connectivity test).
- The trading platform (plans to) actively approach and market its activities to Dutch professional parties (Initiative test ).
If only the connectivity test provides a positive outcome the factors described below could indicate, according to the AFM, that the foreign based trading platform is active in the Netherlands: i) The (relative) number of Dutch professional parties active on the platform; ii) The relative share of Dutch professional parties on the total volume of the platform; iii) the impact of the platform on the Dutch capital markets.
If the AFM qualifies the trading platform established abroad as being active in the Netherlands, these activities will be subject to the prohibition of Section 5:26, Subsection 1 of the FSA. The respective trading platform will have to apply for a dispensation of the recognition requirements, as described in Section 5:27, Subsection 2 of the FSA, if it wishes to remain being active in the Netherlands. The final decision to grant such a dispensation will be made by the Minister of Finance, upon advice by the AFM. A regulated market, as defined in Section 1:1 of the FSA, of which the holder is established in a member state of the European Economic Area, can make use of the “Uitvoeringsregeling WFT” as referred to in Section 5:26, Subsection 4 of the FSA.
(1) Please be referred to the heading ‘Activities of foreign markets in financial instruments in the Netherlands’
(2) Placing trading screens included the following: the holder of a market in financial instruments places hardware at a member, the supplying of software to gain access to the trading platform and to trade on it, the provision of a leased line, or the provision of a secured internet portal.
(3) This could be by informative meetings, road shows, mailings, the use of the Dutch language, provision of information on or referral to Dutch laws or the Dutch regime, etc.