FCA Handbook - COBS 18.2 Energy market activity and oil market activity

You are viewing COBS 18.2 Energy market activity and oil market activity as of . COBS 18.2 Energy market activity and oil market activity was last updated on 01/10/2018.

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COBS 18.2 Energy market activity and oil market activity

Energy market activity and oil market activity - MiFID business

The provisions of COBS in the table do not apply in relation to any energy market activity or oil market activity carried on by a firm which is MiFID or equivalent third country business:

COBS	Description
6.1A	Adviser charging and remuneration
6.1B	Retail investment product provider requirements relating to adviser charging and remuneration
COBS 6.2B	Describing advice services

6.4	Disclosure of charges, remuneration and commission
9.4	Suitability reports
9.6	Special rules for providing basic advice on a stakeholder product

16.3.9	Guidance on contingent liability transaction
16.5	Quotations for surrender values
16.6	Life insurance contracts - communications to clients
16 Annex 1 R (1) 14	Information to be provided in accordance with COBS 16.2.1 R and 16.3

The provisions of COBS in the table are unlikely to be relevant to any energy market activity or oil market activity carried on by a firm which is MiFID or equivalent third country business:

COBS	Description
5	Distance communications
7	Insurance distribution
13	Preparing product information
14.2	Providing product information to clients
15	Cancellation
17	Claims handling for long-term care insurance
18.1	Trustee firms' regime
18.3	Corporate finance business
18.4	Stock lending activity
19	Pensions - supplementary provisions
20	With-profits

Energy market activity and oil market activity - non-MiFID business

Only the COBS provisions in the table apply to energy market activity or oil market activity carried on by a firm which is not:

(1)
MiFID or equivalent third country business; or
(2)
energy market activity or oil market activity set out in COBS 18.2.4 R.

COBS	Description
1	Application
2.1.1	Acting honestly, fairly and professionally
2.4	Agent as client and reliance on others
3	Client categorisation
4	Communication to clients including financial promotions, but only in relation to communicating or approving a financial promotion
5.2	E-commerce

12	Investment research and non-independent research
16.2	Occasional reporting

Energy market activity and oil market activity - dealings with or through authorised persons

Only the COBS provisions in the table apply to energy market activity or oil market activity carried on by a firm which is not MiFID or equivalent third country business but which, if the firm were not authorised, would not be a regulated activity because of article 16 of the Regulated Activities Order (Dealing in contractually based investments) or article 22 of the Regulated Activities Order (Deals with or through authorised persons etc.).

COBS	Description
1	Application
2.4	Agent as client and reliance on others
4.12	Unregulated collective investment schemes
5.2	E-commerce

Other non-MiFID business related to commodity or exotic derivative instruments

COBS applies as set out in the table to firms in respect of activities referred to in the general application rule related to:

(1)
commodity futures; or
(2)
commodity options; or
(3)
contracts for differences related to an underlying commodity; or
(4)
other futures or contracts for differences which are not related to commodities, financial instruments or cash;

which is not MiFID or equivalent third country business and energy market activity or oil market activity.

Application of COBS to other non-MiFID business related to commodity derivative instruments
All of COBS applies, except COBS 18.2.6 R to COBS 18.2.9 E applies instead of COBS 11.2 (Best execution)

Best execution for other non-MIFID business related to commodity and exotic derivative instruments

A firm that executes a customer order in the course of carrying out activities referred to in COBS 18.2.5 R must provide best execution.

Exceptions to best execution

The duty to provide best execution does not apply where:

(1)
the firm has agreed with a professional client that it does not owe a duty of best execution to him; or
(2)
the firm relies on another person to whom it passes a customer order for execution to provide best execution, but only if it has taken reasonable care to ensure that he will do so.

Providing best execution

To provide best execution, a firm must:

(1)
take reasonable care to ascertain the price which is the best available for the customer order in the relevant market at the time for transactions of the kind and size concerned; and
(2)
execute the customer order at a price which is no less advantageous to the customer, unless the firm has taken reasonable steps to ensure that it would be in the customer's best interests not to do so.

(1)
In order to take reasonable care to ascertain the price which is the best available, a firm:
1. (a)
  should disregard any charges and commission made by it or its agents that are disclosed to the customer under COBS 6.1.9 R (Information about costs and associated charges);
2. (b)
  need not have access to competing exchanges, or to all, or a minimum number of, available price sources; but if a firm can access prices displayed by different exchanges and trading platforms and make a direct and immediate comparison, it should execute the customer order at the best price available to the firm on such exchanges or trading platforms, if this is in the best interests of the customer;
3. (c)
  should pass on to the customer the price at which it executes the transaction to meet the customer order; and
4. (d)
  should not take a mark-up or mark-down from the price at which it executes the customer order.
(2)
Compliance with (1) may be relied on as tending to establish compliance with the requirement to take reasonable care to ascertain the price which is the best available for the customer order (see COBS 18.2.8 R (1))
(3)
Contravention of (1) may be relied on as tending to establish contravention of the requirement to take reasonable care to ascertain the price which is the best available for the customer order (see COBS 18.2.8 R (1))