Financial Services and Markets Bill - continued        House of Lords
PART XVIII, RECOGNISED INVESTMENT EXCHANGES AND CLEARING HOUSES - continued
Other matters - continued

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  CHAPTER II
  COMPETITION SCRUTINY
Interpretation.     295. - (1) In this Chapter and Chapter III-
 
 
    "regulatory provisions" means-
 
      (a) the rules of an investment exchange or a clearing house;
 
      (b) any guidance issued by an investment exchange or clearing house;
 
      (c) in the case of an investment exchange, the arrangements and particulars described in section 280(4);
 
      (d) in the case of a clearing house, the arrangements and particulars described in section 281(4);
 
    "trading practice" means a practice of persons who are subject to the rules made by a recognised investment exchange or a recognised clearing house-
 
      (a) which relates to business in respect of which those persons are subject to the rules of the investment exchange or clearing house; and
 
      (b) which is required or contemplated by those rules or by guidance issued by the investment exchange or clearing house or which is otherwise attributable to the conduct of the investment exchange or clearing house.
      (2) For the purposes of this Chapter, any regulatory provision, practice or trading practice has a significant anti-competitive effect if it has, or is intended or likely to have, to any significant extent, the effect of preventing, restricting or distorting competition.
 
      (3) For the purposes of this Chapter the following are permitted purposes-
 
 
    (a) protecting investors;
 
    (b) detecting money laundering;
 
    (c) preventing money laundering;
 
    (d) ensuring compliance with an international obligation of the United Kingdom.
      (4) In determining under this Chapter whether any guidance has, or is likely to have, a particular effect, it may be assumed that persons to whom it is addressed will act in accordance with it.
 
Examination of rules and guidance.     296. - (1) The Authority may not make a recognition order without the approval of the Treasury.
 
      (2) The Treasury may not give their approval unless they are satisfied that-
 
 
    (a) the applicant's regulatory provisions do not have a significant anti-competitive effect or, if they do have such an effect, have an anti-competitive effect which is no greater than is necessary for a permitted purpose;
 
    (b) the adoption or enforcement of the regulatory provisions is not likely to amount to an abuse of a dominant position on the part of the applicant; and
 
    (c) the regulatory provisions do not require or contemplate conduct or trading practices which amount, or are likely to amount, to an abuse of a dominant position.
      (3) In deciding whether to give their approval, the Treasury must have regard to any report prepared by the Director under section 298.
 
      (4) If the Director reports that the regulatory provisions in question do not have a significant anti-competitive effect, the Treasury may not withhold their approval under this section.
 
Continuing scrutiny.     297. - (1) The Treasury may give a remedial direction in relation to a recognised body if it appears to them that-
 
 
    (a) any of the regulatory provisions of the body,
 
    (b) any practices of the body, or
 
    (c) any trading practices,
  have a significant anti-competitive effect which is greater than is necessary for a permitted purpose.
 
      (2) The Treasury may also give a remedial direction in relation to a recognised body if it appears to them that-
 
 
    (a) the body's regulatory provisions,
 
    (b) any of the body's practices, or
 
    (c) any trading practice,
  amount to an abuse of a dominant position.
 
      (3) A "remedial direction" is a direction requiring the Authority-
 
 
    (a) to exercise its powers under section 291(2) to revoke the recognition order for the body concerned; or
 
    (b) to exercise its powers under section 289 with a view to securing that-
 
      (i) the significant anti-competitive effect of the body's regulatory provisions or any of the practices referred to in subsection (1) is no greater than is necessary for a permitted purpose; or
 
      (ii) any person engaging in conduct amounting to an abuse of a dominant position ceases the conduct concerned.
      (4) The Treasury may give a remedial direction only if they have received a report from the Director under subsection (3), (4) or (7) of section 299.
 
Initial report by Director General of Fair Trading.     298. - (1) The Authority must send to the Treasury and to the Director-
 
 
    (a) a copy of any regulatory provisions with which it is provided on an application for recognition under section 280 or 281; and
 
    (b) any other information with which it is provided in connection with the application.
      (2) The Director must report to the Treasury on whether-
 
 
    (a) any of the regulatory provisions of which copies are sent to him under subsection (1) have a significant anti-competitive effect;
 
    (b) the adoption or enforcement of the regulatory provisions is likely to amount to an abuse of a dominant position on the part of the applicant; or
 
    (c) the regulatory provisions require or contemplate conduct or trading practices which amount, or are likely to amount, to an abuse of a dominant position.
      (3) If the Director's conclusion is that one or more provisions have a significant anti-competitive effect, he must give details of what the effect is, or is likely to be.
 
      (4) If the Director's conclusion is that-
 
 
    (a) the adoption or enforcement of the regulatory provisions is likely to amount to an abuse of a dominant position on the part of the applicant, or
 
    (b) one or more provisions require or contemplate conduct or trading practices which amount, or are likely to amount to, an abuse of a dominant position,
  he must state his reasons for that conclusion.
 
Further reports by Director General of Fair Trading.     299. - (1) The Authority must send to the Treasury and to the Director copies of any notice received by it under section 286(5) together with such information as the Authority considers will assist the Director in carrying out his functions under subsections (2) to (4) of this section.
 
      (2) The Director must keep under review-
 
 
    (a) the regulatory provisions of recognised bodies;
 
    (b) the matters specified in any notices of which copies are sent to him under this section; and
 
    (c) any matters which are the subject of a report provided by an overseas investment exchange or an overseas clearing house under section 288.
      (3) If at any time the Director considers that-
 
 
    (a) any regulatory provisions or any such matters as are mentioned in subsection (2)(b) (taken alone or together), or
 
    (b) any such matters as are mentioned in subsection (2)(c),
  have a significant anti-competitive effect, he must report that to the Treasury.
 
      (4) If at any time the Director considers that-
 
 
    (a) a recognised body's regulatory provisions, or
 
    (b) any such matters as are mentioned in subsection (2)(b) or (c),
  amount to an abuse of a dominant position, he must report that to the Treasury.
 
      (5) The Director may report to the Treasury that a matter of the kind mentioned in subsection (2)(b) does not in his opinion have a significant anti-competitive effect or amount to an abuse of a dominant position.
 
      (6) The Director may at any time consider whether any practices of a recognised body or trading practices of a person subject to the rules of such a body-
 
 
    (a) have a significant anti-competitive effect and, if so, what the effect is or is likely to be, or
 
    (b) amount to an abuse of a dominant position.
      (7) If the Director considers that any such practices-
 
 
    (a) have such an effect, or
 
    (b) amount to an abuse of a dominant position,
  he must make a report to the Treasury.
 
 
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Prepared 11 February 2000