Germany Introduces Limited-Scope Exemption for Non-European Proprietary Trading Firms Trading on German Trading Venues

On May 28, the German government introduced an amendment to the German Banking Act regarding the license requirements for “third-country” (i.e., non-European) proprietary trading firms seeking access to, or membership of, German trading venues (the Amendment).

Under the Amendments, third-country firms exclusively conducting proprietary trading as an exchange participant on a German trading venue or exchange do not require a license from the German Federal Financial Supervisory Authority (BaFin). However, significantly, this exemption does not cover any such firms that are performing the following activities:

• market making;

• acting as a systematic internalizer;

• principal trading as a service to clients; or

• high frequency trading.

Eligible third-country proprietary trading firms applying to become exchange participants will benefit from the exemption by operation of law and are not required to submit an application to BaFin.

The Amendment has been noted by the Eurex Exchange and Frankfurt Stock Exchange in their circular notices available here and here respectively.