UK Government implements major post-Brexit Mifir changes

The updates concern systemic internalisers (SI), share trading obligations (STO), double volume caps (DVC), derivatives trading obligations (DTO) and clearing obligations.

Key proposed amendments to UK Mifir are set to come into effect in the UK today, as outlined in the recent Financial Services and Markets Act 2023. 

Changes to the framework are intended to reduce trading restrictions as a whole, and thus enable the market to access more diverse liquidity.

Whilst some changes remain under consideration by the FCA, including the framework for a consolidated tape, some are now confirmed.

Read more: Mifid post-Brexit: The current state of play

Specifically, the updates to rules regard: Systemic internalisers (SI), share trading obligations (STO), double volume caps (DVC), derivatives trading obligations (DTO) and clearing obligations.

The STO has been scrappedand the DTO has been amended to ensure that the obligation is more aligned to the clearing obligations under EMIR.

DVC’s have also been eliminated, as well as restrictions regarding the mid-point crossing of trades. Up until now, SI’s matched only orders large in scale at mid-point, however as of now, no restrictions will be placed on SI’s, with any orders permitted to be matched at mid-point.

Read more: HM Treasury makes first set of sweeping changes to wholesale markets post-Brexit

Speaking earlier this year following the enactment of FSMA 2023, Peter Bevan, global practice head of Linklaters financial regulation group, said: “The UK Government will shortly start using its powers under FSMA 2023 to deliver on government proposals to devolve vast powers to the regulators now that they have been returned from the EU.

“While this process could take many years, there are changes to important aspects of financial regulation in the shorter term which have the potential to contribute significantly to the UK’s goal of being a dynamic and competitive financial services hub.”

The European Union has taken a largely divergent stance to the UK in several key areas post-Brexit, in particular in those relating to transparency. Key to the post-Brexit redesign of the systematic internaliser regime on either side of the channel is the minimum quote size of orders that can be matched at midpoint. Under Mifid SIs have been restricted to just large in scale for midpoint trading.

While the UK has removed size restriction on orders that can be matched at midpoint on SI’s, the EU is discussing limiting SIs through a different minimum quote size which is expected to be determined through further Trilogues.

Additionally, DTO’s are also set to be adjusted in the EU, however specifically aligning to the EU’s clearing obligations. In terms of STO, the EU is again taking a slightly less severe stance, aiming to limit the scope rather than eliminate completely.