In what ways do you think increasing retail investor participation can strengthen the UK capital markets, and why do you believe this is important for the broader financial ecosystem?
Will Fenna
Firstly, it’s important to state just how exciting a time it is for the retail trading and investing landscape. Barclays estimates that £430bn of UK consumer savings is currently held in cash by 13 million individuals – money that could be generating better returns if invested. This is why we feel there is a huge opportunity here for the UK.
If we look at retail investor participation rates in economies around the world, the UK is lagging behind. For example, in the UK only 11% of households directly hold stocks and shares. In comparison, in Sweden it’s around 22% and similarly Australia is about 21%. But we are seeing a growing trend amongst retail investors in the UK to take more ownership of their own financial futures. Many factors have contributed to this, such as rise of financial content on social media and the drive to democratise investing – that is to say accessibility. The technology available to retail investors is making it easier than ever to take charge of your financial future.
This trend is also reflected in the regulatory reforms taking place in the UK right now, which will ultimately benefit the end retail investor and subsequently the wider ecosystem, including the FCA’s expected changes to facilitate retail access to low denomination bonds by simplifying disclosure requirements. More retail participation in UK capital markets means stronger capital markets. When people invest in their own economy, it also gives them a sense of belonging and ownership and more of a say in their economy, which we think is a great thing. We’re always looking at how we can enfranchise retail investors and support retail brokers and the intermediaries too.
How is LSEG both simplifying access and reducing friction for retail investors to access UK capital markets?
When looking at ways to remove barriers for retail brokers and intermediaries, to support them and their clients directly accessing our market, we’ve worked across LSEG to do that. In October 2024, we launched the Retail Broker Order Book Trading Scheme, which waives fees for retail qualifying orders across the London Stock Exchange. Effective 1 January 2025, we will also be waiving market data end user fees for retail investors, allowing them to access real-time market data from both the London Stock Exchange and Turquoise. Having access to the latest, most accurate data available will drive more informed trading by investors in UK securities.
On the post trade side, we’ve also looked at the overall end to end trade lifecycle for retail and announced a Retail Pricing Scheme through LCH’s EquityClear service – wherein we have reduced clearing fees to zero and given various other discounts on flows identified as originating from retail investors, including on eligible ETP/ ETF settlements. This again makes sure that the benefits of the retail enfranchisement are across the entire trading and post-trade lifecycle. All those obstacles we’re addressing are really quite monumental.
We have focused a lot on the equities market, do you see increased retail participation in any other asset classes?
Our initial focus has been on equities, but if we turn our attention to fixed income, there is a similar excitement in the market looking at 2025 and beyond.
Bonds have historically been reserved for wholesale, but this is changing and it’s really swaying in favour of the retail investor. The UK’s Financial Conduct Authority (FCA) have been doing some really good work over the past few years to reform the UK capital markets and are conducting consultations on making it simpler for UK listed companies to issue bonds in smaller denominations so that they are accessible to retail investors too. So, in theory, that means that the average retail investor can actually hold bonds issued by listed companies as part of their wider investment portfolio.
It’s also worth saying that retail investors can already participate in the UK gilt market, but they can now start doing so with smaller denominations. We recognise that many retail investors have an appetite to hold not just government debt, but also corporate debt. Those potential regulatory changes from the FCA could make the corporate bond market a really exciting and attractive landscape for a retail investor.
What next for LSEG and the wider retail and investing landscape?
What we really want to do is build on what we’ve created. We’ve laid some good foundations, including the release of our ‘Rise of Retail’ video series, discussing the work that is being done across the sector to support retail enfranchisement, and has had a positive response from all parts of the industry.
In 2025, we want to make sure that we continue to support retail traders. We want retail to have a say in and care about their domestic markets while relying on a suite of solutions which is strong. Market sentiment is leaning towards further retail inclusion in capital markets, and as a venue we want to keep driving that positive discussion.
