United Kingdom (and EU regulation)

A forward look at regulation of the UK’s wholesale financial market – FCA speech

By Simon Lovegrove (UK) on March 17, 2021 Posted in Regulation and compliance, United Kingdom

On 16 March 2021, the FCA published a speech by Edwin Schooling Latter (Director of Markets and Wholesale Policy, FCA) entitled A forward look at regulation of the UK’s wholesale financial market.

Key points in the speech include:

In relation to the Securities Financing Transaction Regulation (SFTR), the FCA encouraged and supported HM Treasury’s decision not to bring non-financial companies into scope of UK SFTR reporting. In terms of further divergence from the current SFTR reporting regime, the FCA feels that its prudent to allow the regime to mature before considering further refinements. One change the FCA is open to considering is whether to remove commodities lending transactions from scope. These transactions were not included within the original Financial Stability Board recommendations which focused on repo, securities lending and margin lending. The FCA will also assess carefully the evidence on the relative benefits of single versus double-sided reporting.
Consistent with FCA advice, HM Treasury decided not to implement the EU Central Securities Depositories Regulation (CSDR) settlement discipline regime in the UK.
Together with the Bank of England and HM Treasury, the FCA remains open to ideas on whether, and, if so, how, the UK’s settlement arrangements could be refreshed to support both market liquidity and settlement efficiency. The FCA is happy to work with “the grain of market consensus” if and where there is a case for change.
The FCA is carefully considering Lord Hill’s recommendations for changes to the listing rules, in line with its statutory objectives, including on free float, dual class share structures, and special purpose acquisition companies. The FCA is treating a response to these as a priority.
The FCA feels that the detailed machinery of the MiFID II transparency regime can be difficult to follow and it has an opportunity to refine the framework for securities and derivatives trading in a way that helps those doing business in the UK, without sacrificing equivalent outcomes in terms of investor protection and market integrity.
Another part of MiFID II about which we have expressed doubts from the outset is the commodity derivatives regime. The EU has identified the need for revisiting the MiFID II commodity derivatives regime as part of its ‘quick fix’. The FCA thinks there is scope substantially to simplify the regime.