In Policy Statement 23/4 (PS23/4) on “Improving Equity Secondary Markets,” the UK’s Financial Conduct Authority sets out its final proposed amendments to:
As part of the Wholesale Markets Review being conducted with the UK’s Treasury, these measures are intended to improve execution quality and price formation, lower costs of trading, enhance liquidity and streamline reporting obligations through the changes summarised below. Trading venues, investment firms and Approved Publication Arrangements consolidating reports will need to update their systems, including changes to reporting fields and trade flags that may have a knock-on effect on transaction reporting systems.
Improving the Contents of Post-Trade Transparency
Measures include:
Pre-Trade Transparency Waivers
Measures include targeted changes to the reference price waiver and order management facility waiver to allow reference prices to be derived from non-UK trading venues, provided they are reliable, transparent and consistent with best execution.
Tick Size Regime
The FCA is maintaining its position of allowing trading venues to use the minimum tick size of the primary market where the share was first admitted to trading located overseas if it is smaller than the tick size that results from calculations using UK data.
Improving Market-Wide Resilience During Outages
The FCA is working with sub-committees and IOSCO in this area and will propose amendments to the waivers’ regime to allow for reference prices from multiple markets. It is also working with the UK’s Treasury on developing the consolidated tape to enhance market resilience during outages.
The UK Market for Retail Orders
The FCA will continue to discuss with stakeholders concerns about the disadvantages faced by retail investors, including through failures to provide best execution.
Timing
The new post-trade transparency requirements will be in force as of April 2024, and the changes to waivers from pre-trade transparency and to the tick size regime apply immediately. PS23/4 also notes that rules in this area are currently under review in the EU, so further divergence may follow.