Exclusive: GAIN Capital adds Mark Richards to its board, representing Michael Spencer’s IPGLAnother blow for Bitcoin – Stripe is dropping the “people’s currency”bitFlyer launches in Europe, becomes first bitcoin exchange to be regulated in JapanAquis Technologies to supply UBS MTF with surveillance & reporting solutionHow to master forex market structure in 3 simple stepsRival completes certification for Cboe Futures Exchange migration to Bats technology platformFICO partners with 4most Europe to accelerate banks’ regulatory complianceLuxembourg Stock Exchange partners with ADBC to expand the Green Bond MarketHKEX sets launch date for new securities trading systemAgency for the Cooperation of Energy Regulators extends its contract with NasdaqDeutsche Börse AG appoints Ingrid M. Haas as Managing Director of Communications and MarketingShenzhen Stock Exchange improves the risk management systemSeabury partners with Parabellum Markets for FX liquidity source in the AmericasSaxo Bank adds New York and London infrastructure to bolster FX Prime-of-Prime offeringMiFID II, GDPR and ESMA: The Not-So-Terrible TrioBlackwell Global Hong Kong acquires new SFC asset management licenseNasdaq elects Joseph Mecane to the Board of Directors of its U.S. ExchangesIG Group reports record 1H-2018 Revenue, establishes Germany sub ahead of BrexitBNY Mellon hires Michael Cooper from Deutsche Bank to head new institutional FX prime brokerage businessExclusive: Supreme Court rejects appeal against Israel Binary Options law

Does a “Tied Agent” designation equate to an “Introducing Broker (IB)” under MiFID II?

introducing broker fx mifid tied agent

The following guest post is courtesy of Shobin Matthew Simon, Institutional Sales Manager at Advanced Markets.

Do you have an idea for a guest post? Want your article to be viewed by the hundreds of thousands of viewers who regularly visit LeapRate and receive our daily email newsletter? Let us know at [email protected].

Shobin Simon Advanced Markets
Shobin Simon, Advanced Markets

With the deadline for MiFID II implementation fast approaching, a lot of confusion and uncertainty still exists within the FX Industry. MiFID II regulation is divided into several distinct rule sets with the legislation applying to a broad range of financial industry players, those who provide investment services, such as investment banks, portfolio managers and brokers, and intermediaries such as inter-dealer brokers and market-makers. The main objective of MiFID II is to ensure the fair, effective and safe operation of financial markets. Failure to comply with the directive could result in significant fines.

One of the more confusing topics that, I believe, requires further explanation under MFID II deals with Tied agents and Introducing brokers. Is a Tied Agents equivalent to an Introducing Broker? Let’s look at each of them in turn and see how they differ and how each is affected by the rule changes in the new MiFID II directive.

What is a Tied Agent and what changes are coming under MiFID II?

The legal description of a tied agent is that it is “a firm who, under the full and unconditional responsibility of only one MiFID investment firm on whose behalf it acts, promotes investment and/or ancillary services to clients or provides the services of either receiving and transmitting instructions or orders, placing financial instruments or providing investment advice on financial instruments”.

Some minor changes are being made to the rules relating to tied agents, including one clarifying that tied agents will be able to hold money belonging to clients. EEA Member states will be required to implement a tied agent regime in their own state (whereas previously it was optional).

It is not possible for a tied agent to provide investment services on behalf of more than one investment firm to which MiFID applies.

Let’s take the UK’s FCA as an example and look at a scenario in which a UK firm appoints a tied agent established in another EEA member state, but in which that tied agent cannot be registered (because the EEA member state does not maintain a tied agent regime). Under such circumstances, such a tied agent must be registered with the FCA.

Under MiFID II, tied agents established in other EEA member states need not to be registered in the UK for these purposes because all EEA member states will be required to maintain tied agent regimes.

What is an Introducing Broker and the inducement changes under MiFID II?

A firm /Individual which introduces transactions relating to designated investments arranged (brought about) for its clients to a clearing firm.

Introducing Broker’s (IBs) introduce clients to investment firms, so that firms can provide services to those clients. This does not bring about a transaction and so will not amount to receiving and transmitting orders and therefore doesn’t come under the scope of MiFID. But if an IB does more than merely introduce, for example an introducing broker, receiving orders on behalf of your clients and transmitting these to clearing firms and therefore may fall within the scope of MiFID.

MiFID II enhances the existing MiFID inducements standards. It clearly states that any inducements should be disclosed to the client.

Article 9(3)(c) of MiFID II introduces a new, explicit requirement on the management bodies of investment firms to “define, approve and oversee […] a remuneration policy of persons involved in the provision of services to clients aimed at encouraging responsible business conduct, fair treatment of clients as well as avoiding conflicts of interest in the relationships with clients”.

Article 24(9) of MiFID II states that investment firms are regarded as not fulfilling their obligations under Article 23 or Article 24(1) where they pay or are paid any fee or commission, or provide or are provided with any non-monetary benefit in connection with the provision of an investment service or ancillary service, to or by any party except the client or a person on behalf of the client, other than where the payment or benefit:

  1. Is designed to enhance the quality of the relevant service to the client; and
  2. Does not impair compliance with the firm’s duty to act honestly, fairly and professionally in accordance with the best interest of its clients.

The key goal of MiFID II directive is to bring transparency to the financial markets. MiFID II restores the existing law and extends the scope of MiFID 1. Even though the implementation increases costs and poses significant challenges for brokers, in my opinion it will also strengthen Europe’s financial market and bring clarity to the system.

You can download a list of the high-impact MiFID II changes that may impact your business most here.

* This is my opinion and not a legal advice.

Related News


Does a “Tied Agent” designation equate to an “Introducing Broker (IB)” under MiFID II?


Send this to a friend

Subscribe to LeapRate
Fill out the form below for more information
for lising in LeapRate's Forex Yellow Pages

Please enter the company name, email address to reach you and phone # (optional):

Please fill out the message field to the right for any questions or special inquiry: