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Vedder Thinking | News Sam Tyfield Discusses FCA’s Recent “Payment for Order Flow” Supervisory Notice in Complinet

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The UK Financial Conduct Authority (FCA) recently issued a supervisory notice on payment for order flow (PFOF) in the listed derivatives market that found that many wholesale brokers implemented only limited systems and controls to prevent inappropriately charging a PFOF fee. Some lawyers have challenged FCA’s assertations, and Sam Tyfield, a partner in the firm’s London Finance & Transactions practice, is quoted in an article on the subject in Complinet (a leading provider of global compliance information).

According to the article, the FCA has long maintained that PFOF creates a conflict of interest. However, as Tyfield points out, it is not uncommon in the financial markets for brokers to charge both sides to a deal.

“The FCA have been focused on listed derivatives, but there are all sorts of instruments which still trade with a price charged to both sides. No one considers that to be payment for order flow and neither did the FCA until now,” Tyfield says.

The article questions a concept that the FCA introduced in its statement of “exclusive” and “non-exclusive” liquidity as a guide for how brokers should or shouldn’t act in regard to PFOF in a given situation. “This is the first time anyone’s seen that,” said Tyfield.

The article also quotes Tyfield saying, "We're going to see some enforcement action now; sadly, I'm sure we will. We shouldn't do; they have kept moving the goal posts."

To read the full text of the article “FCA papers says brokers' pay-for-play controls are limited, lawyers query some conclusions,” please click here.


Sam Tyfield