FCA launches consultation on how to improve UK equity markets

The consultation paper, seen by The TRADE, contains proposals aimed at improving the functioning of the equity secondary markets. 

The UK’s Financial Conduct Authority (FCA) is consulting on proposals intended to improve how UK-based equity markets operate, The TRADE can reveal.  

The proposals are set to lower the cost of reporting for firms, improve post-trade transparency and remove restrictions preventing UK trading venues from competing with other markets.  

In particular, the regulator will seek to improve the content and consistency of post-trade transparency reports; establish a new ‘designated reporter’ status for OTC trades; allow UK trading venues to use reference prices from overseas markets (where those prices are “robust, reliable and transparent”); and permit the use of the tick size regime from overseas primary markets.   

“We also propose to remove or amend some provisions that impose material operational and compliance costs on firms but have not delivered material benefits to end users or to market functioning,” said the FCA.  

The consultation paper is part of the Wholesale Markets Review (WMR), the review of UK wholesale financial markets that the regulator has been conducting with the Treasury.  

“We are consulting now because the proposed reforms concern parts of the regime that are already set out in regulatory rules and guidance and are therefore not contingent on changes that are intended to be implemented via the Financial Services and Markets Bill,” said the FCA.

“This is to ensure that burdensome and unnecessary requirements are removed as soon as possible.”

The regulator has engaged extensively with market participants on the new proposals as part of the WMR, but may consider a broader review of equity markets in other areas, should it be required.  

The FCA is also seeking views on the structure of UK markets for retail orders and exploring its approach to improving UK markets’ resilience to outages.