On 3 March 2022, the FCA published a speech by Edwin Schooling Latter entitled ‘Where next for UK Market Structure’.
Key points in the speech include:
- UK markets worked well in response to the coronavirus (Covid-19) pandemic. But Lord Hill’s UK Listing Review Report, published in March 2021, helped illuminate and shape consensus on a number of refinements to the Listing regime. The FCA has moved quickly to address Lord Hill’s findings. For example, by late July it had confirmed the changes to the Listing Rules for special purpose acquisition companies (SPACs) and these changes came into effect on 10 August 2022. The FCA’s model was designed with the specific intention not to invite a rush of poor propositions. The FCA is pleased that there are now examples of SPACs who have listed in the past months structured to take advantage of the new approach.
- The FCA is now working with HM Treasury on Lord Hill’s recommendation to recalibrate the Prospectus Regime to make disclosures for different types of capital raising more proportionate to the type of capital raising being undertaken. This is to some degree a return to previous UK practice.
- Mark Austin’s review into Secondary Capital Raising is also shortly to report, and the FCA looks forward to engaging with its findings.
- Further to HM Treasury’s Wholesale Markets Review, the Economic Secretary to the Treasury has confirmed the government’s intention to repeal the double volume cap and the share trading obligation, recalibrate the transparency regime for derivatives and bonds, and reduce the scope of the commodity derivatives position limits regime. The Economic Secretary described in a speech how some of the changes will be taken forward.
- The FCA has also set out in its 2021/22 Business Plan how it is committed to progress consultations on parts of the UK’s MiFID regime that fall within its rules and guidance and relate to the Wholesale Markets Review. The EU is also currently reviewing MiFID. There are some places where the details of the UK’s approach differ from that of the EU. For example, while in the UK so-called dark trading caps are being removed, the EU is moving to tighter restrictions on such trading.
- The trade reporting obligation is currently determined by whether a counterparty is a systematic internaliser, on an instrument-by-instrument basis. The FCA will seek market views on allowing firms to elect to be trade reporters regardless of whether they are a systematic internaliser in a particular instrument. Market participants have asked if the FCA could maintain a list of such reporters, giving clarity to market participants. The FCA is open to considering that idea.
- The FCA will consult on allowing UK trading venues to source reference prices from any overseas trading venue, providing those prices are robust, transparent, and consistent with best execution. That would allow prices derived not only from EU venues, but also those in other jurisdictions such as the United States or Switzerland.
- The FCA will also consult on changes to allow the use of tick sizes from an overseas primary market when those are smaller than those determined based on trading in the UK. For newly issued instruments, the FCA will propose to allow the UK venue of the original listing to set the initial tick size. This could reduce the cost of trading for buyers and sellers of shares.
- The FCA would like to seek market views on changes to improve post-trade flags, i.e. the descriptors required in post-trade reports to identify the nature of the trade.
- In the months ahead the FCA will be analysing the prices, costs and licensing requirements for trading data to see if they are consistent with competition in the interests of market users. The FCA wants the UK to be a good place to do business – both for the users of trading data, and for trading venues that generate such data.
- The FCA would like to explore if the regime for calculation of thresholds for block trades in bonds and derivatives can be simplified.
- The FCA is planning to consult in the second quarter on the detail of some of these changes.