The Securities Supervision/Asset Management Directorate is also responsible for supervising the solvency and conduct of securities trading banks. The reason for this is that these institutions are primarily engaged in securities trading and are classified as investment firms.

Because of their specialisation in securities business, the business models of the securities trading banks are different from those of the credit institutions, ranging from traditional brokerage activities on the stock exchanges to own account trading and corporate finance or trading in energy derivatives. With the entry into force of the Markets in Financial Instruments Directive II (MiFID II) on 3 January 2018¹, further regulated activities have been added, for example systematic internalisation or the operation of a multilateral trading facility (MTF).²

Competition

The fierce competition in the business with institutional customers meant that securities trading banks operating in Germany again faced a strongly competitive environment in 2017. One institution reduced the scope of its activities as a result of the capital requirements for securities trading banks and is continuing its business as a financial services institution.

One institution insolvent

In the case of one institution, BaFin arranged a hearing on the proposed revocation of its authorisation due to the persistent absence of risk-bearing capacity in its business model. At the hearing, the institution then indicated that it had become insolvent. In response, BaFin applied to the competent insolvency court to initiate insolvency proceedings in relation to the assets of the institution. Since then, the institution has returned its authorisation as a securities trading bank and wound up all its activities requiring authorisation.

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