Food for thought: ION Fidessa’s Regulation for Breakfast focused on the new FCA regulations

Recently, we welcomed colleagues from across the capital markets to our London office for a wide-ranging discussion on the current European regulatory landscape. The conversation explored the latest developments in the EU, including consolidated tape proposals and revisions to MiFID II. The main focus of attention was the upcoming UK Financial Conduct Authority (FCA) regulations and their potential impact on the equities market.

A brief overview of recent history provided context, starting with the 2018 MiFID II regulation that aimed to improve trading transparency and standardize reporting. However, Brexit has complicated the regulatory plot. We discussed how Fidessa has helped navigate these challenges, including cross-jurisdiction functionality for UK and EU trade reporting, and new exchange gateways for EU venues.

After this, we dived into the immediate upcoming changes. In the EU, the recommendations of the MiFID II review, recently published in the official journal, will come into effect in September 2025. Establishing the Consolidated Tape will be the focus of the next year. In the UK, revisions to the Financial Services and Markets Act (FSMA) have removed the double volume cap (DVC) and midpoint trading restrictions for Systematic Internalisers (SIs). We discussed some effects of the DVC, including driving venue innovation and intra-day auctions. One conclusion is that regulators in both jurisdictions are becoming increasingly data-driven, with future developments likely to be informed by evidential effects on trading flows. In the immediate future, the expectation is that the EU will also move away from the DVC, replacing it with a single volume cap.

Focus on the new FCA regulations

The conversation then turned to the new FCA regulations, including:

• Give-ups and give-ins, and changes to the scope of exemptions for trade publication.
• The PRIC post-trade flag: No longer valid in the UK, so market participants currently using it will need to adapt.
• Inter-fund transfers: Market participants may need to review their current systems and processes due to changes to the scope of exemptions for trade reporting.
• Inter-affiliate trades are out of scope for publication in the UK, if carried out for risk management purposes.
• Trading Exchange Traded Funds (ETFs) at net asset value, and the new ETF deferral regime means there is no need to report pending price. Exchanges may allow some leeway in late reporting for these trades.
• A new portfolio trade flag (PORT), already available in the EU since January, will now be added in the UK.
• Negotiated trade flags will be reconciled under a single flag. Transaction reporting data may diverge temporarily from the trade reporting data.
• Traditionally, the UK has used minor currency units for post-trade publication; going forward, certain market data feeds will be published in the major currency.
• In terms of the new designated reporter regime for off-exchange trade reporting, Designated Reporters (DRs) will now be responsible for off-exchange trade reporting, while SI status will no longer be used when assessing report responsibility. Some firms became SIs in 2018 purely due to trade reporting, and the expectation is that many of them will become DRs instead. Systems and processes will need to be updated to reflect these changed responsibilities. In addition, different asset classes trading under the same entity will share status. For example, if DR status is registered for a fixed income trading entity, the same status applies to equities if using the same legal entity.

It was great to discuss these issues with peers from across the industry in person and draw out some of the potential implications of these regulatory updates. We hope to run more regulatory-focused events, so why not subscribe to our blog to keep up to date with the latest discussions?