FCA License Holders: Your 12-Month Countdown to New Market Rules Begins

The UK's Financial Conduct Authority (FCA) announced sweeping changes to bond and derivatives market transparency rules today (Tuesday), marking the biggest overhaul of trading regulations since Brexit as the country seeks to cement London's position as a global financial hub.

The UK Tackles Trading Transparency in Post-Brexit Reform

The new framework, set to take effect in December 2025, aims to provide investors with enhanced market data while reducing compliance costs for trading venues and investment firms. The changes represent a significant shift from the complex reporting system inherited from European Union regulations.

"We want UK markets to be efficient and to support economic growth," said Jon Relleen, director of supervision, policy and competition at the FCA. "Putting more information in the hands of investors and giving investment firms greater access to research to inform their strategies will bolster UK markets."

The reforms introduce a simplified post-trade transparency regime with fewer deferrals for bonds and over-the-counter derivatives, while maintaining protections for liquidity providers. In a notable change, the regulator will discontinue its Financial Instruments Transparency System (FITRS), replacing rigid calculations with more flexible criteria for determining market liquidity.

Who this is for:

• Trading venues that facilitate the trading of bonds and derivatives
• Investment firms engaged in bond and derivative trading
• UK branches of overseas firms providing investment services and conducting related activities
• Systematic internalizers dealing in any financial instrument

The new rules will only apply to bonds admitted to trading on venues and certain derivatives subject to clearing Clearing Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Read this Term obligations, significantly streamlining the scope of the regime.

Global investment research budgets are beginning to rebound for the first time since the introduction of MiFID II, according to a report from data analytics firm Substantive Research. The firm observed that research budgets worldwide saw an increase in the first half of 2024.

In response, the UK’s FCA introduced final rules in July 2024, granting institutional investors more flexibility in funding investment research. After industry consultation, the FCA is now considering extending these flexibilities to pooled investment funds, allowing fund managers to bundle research payments with trade execution costs, subject to specific safeguards.

Industry Feedback and Transition Period

The FCA has also modified its original proposals following industry feedback. The framework for bonds will now include three deferral durations instead of the initially proposed two, and the regulator has created longer deferrals for swaps with non-benchmark tenors while lowering threshold sizes for SONIA swaps.

Trading venues and investment firms will benefit from a transition period, with some requirements taking effect earlier. From March 31, 2025, venues won't need to apply pre-trade transparency to voice and request-for-quote trading, while systematic internalizers in bonds and derivatives will be exempt from providing public quotes.

The changes align with the FCA's broader strategy to enhance the UK's competitiveness in global financial markets. The regulator is also establishing a consolidated tape for bonds, aimed at making market data more accessible and cost-effective.

"We want to seize opportunities to enhance and streamline our rules and support the competitiveness of sectors in which the UK is already a recognized world leader," Relleen added.

Trading venues, investment firms, and approved publication arrangements have been advised to begin reviewing their systems and procedures to ensure compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term with the new requirements when they take effect next year.

The reforms come as part of a wider package of measures that includes new proposals to give asset managers of pooled investment funds greater flexibility in how they pay for investment research, potentially making it easier to purchase analysis across borders.

Moreover, the FCA and its Practitioner Panel commissioned a 2023–2024 survey, conducted by Verian, to evaluate industry perceptions of the insitution's regulatory performance. This annual survey, reaching 25,000 firms, gathers trend data to understand how firms perceive the FCA's impact on the market. Conducted between February and April 2024, the survey collected responses from diverse sectors, including retail banking, digital assets, investment management, and wholesale financial markets. Its purpose was to assess trust in the regulatory framework and the FCA’s effectiveness in supporting international trade.