The United Kingdom’s Financial Conduct Authority (FCA) issued its guidelines on Wednesday towards the share trading obligations (STO), allowing British companies to approach European Union exchanges for share trading following the expiry of the Brexit transition period.

These guidelines from the British regulator came only over a week after its European Union counterpart released its approach towards STO post- Brexit  Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades. The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minister Boris Johnson was elected Prime Minister the following month, who was well-known as a headstrong Brexit supporter.  While the United Kingdom was predicted to leave exit the EU by October 31st, 2019, the U.K. Parliament sought out a deadline extension that delayed voting on the new deal.  Following Boris Johnson’s reelection, Brexit occurred on January 31st, 2020 at 11 pm Greenwich Mean Time.  Brexit Creating Ongoing Issues in with Europe While the United Kingdom is in a transition period following its departure from the EU, the U.K. is negotiating its complete trade relationship with the EU, which is the United Kingdom’s largest trade partner. Terms of this trade agreement must be met by January 1st, 2021. Should terms of this trade agreement take longer than the projected resolution date of January 1st, 2021 then the U.K. must acquire an extension no later than June 1st, 2020. Failure to do so will result in the U.K. is subject to tariff and host rule changes exercised by the E.U. This situation is referred to as the “no-deal” Brexit and should this occur the consequences could result in a significant fallout of the U.K. economy.  For the past few years, many banks and lenders operating previously in the UK had been given passporting rights to the European continent. The lingering uncertainty caused by Brexit resulted in many of these lenders relocating their European headquarters within continental Europe. Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades. The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minister Boris Johnson was elected Prime Minister the following month, who was well-known as a headstrong Brexit supporter.  While the United Kingdom was predicted to leave exit the EU by October 31st, 2019, the U.K. Parliament sought out a deadline extension that delayed voting on the new deal.  Following Boris Johnson’s reelection, Brexit occurred on January 31st, 2020 at 11 pm Greenwich Mean Time.  Brexit Creating Ongoing Issues in with Europe While the United Kingdom is in a transition period following its departure from the EU, the U.K. is negotiating its complete trade relationship with the EU, which is the United Kingdom’s largest trade partner. Terms of this trade agreement must be met by January 1st, 2021. Should terms of this trade agreement take longer than the projected resolution date of January 1st, 2021 then the U.K. must acquire an extension no later than June 1st, 2020. Failure to do so will result in the U.K. is subject to tariff and host rule changes exercised by the E.U. This situation is referred to as the “no-deal” Brexit and should this occur the consequences could result in a significant fallout of the U.K. economy.  For the past few years, many banks and lenders operating previously in the UK had been given passporting rights to the European continent. The lingering uncertainty caused by Brexit resulted in many of these lenders relocating their European headquarters within continental Europe. Read this Term.

The FCA highlighted that only ‘mutual equivalence’ would guarantee the businesses to satisfy the STO obligations in both jurisdictions. And if not, the British regulator will use the Temporary Transitional Power (TTP) to avoid disruption allowing firms to continue trading all shares on EU trading venues and systematic internalisers (SIs).

Though this approach will allow UK market participants to access the EU trading venues post-Brexit, they need to ensure certain regulatory obligations.

The regulator highlighted that the guidelines will ensure an open market structure as the UK-based companies will be free to execute trades at the venues offering the best  Execution  Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a common marketing point of emphasis by brokers, whose action execution varies considerably from company to company. When execution prices are not matching the submitted price the client is charged or credited the difference resulting from the negative or positive slippage.Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. Best Execution a Legal ObligationBrokers are required by law to diver to their clients the best execution possible. Some regulators are requiring brokers to submit execution stats in order to assess the quality of their services. Other brokers are regularly posting execution statistics in order to boost the confidence of their clients in the best execution commitment of the company.Best execution has been a point of emphasis in recent years from both retail and institutional players in the FX industry. Negotiating and executing transactions in order to promote a robust, fair, open, liquid and appropriately transparent FX market is identified as one of the six main principles outlined in the FX Global Code of Conduct, which came into effect in 2018. Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a common marketing point of emphasis by brokers, whose action execution varies considerably from company to company. When execution prices are not matching the submitted price the client is charged or credited the difference resulting from the negative or positive slippage.Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. Best Execution a Legal ObligationBrokers are required by law to diver to their clients the best execution possible. Some regulators are requiring brokers to submit execution stats in order to assess the quality of their services. Other brokers are regularly posting execution statistics in order to boost the confidence of their clients in the best execution commitment of the company.Best execution has been a point of emphasis in recent years from both retail and institutional players in the FX industry. Negotiating and executing transactions in order to promote a robust, fair, open, liquid and appropriately transparent FX market is identified as one of the six main principles outlined in the FX Global Code of Conduct, which came into effect in 2018. Read this Term.

“At the end of the transition period, the UK’s and EU’s regimes will be the most equivalent in the world, but as it stands this has not been recognized by the EU,” FCA’s international executive director, Nausicaa Delfas said.

An Opposite Approach by ESMA

The European Securities and Markets Authority (ESMA) earlier ordered the execution of share trades within the European Union following the expiry of the Brexit transition. However, it will allow trading of the EU-listed shares on platforms in London if they are traded in pound sterling.

“While we note ESMA’s recent clarifications to reduce the potential overlap of an EU and UK STO, we chose this simple and comprehensive approach rather than to replicate restrictions based on the jurisdiction of the share issuer, or the currency in which a share is issued,” Delfas added.

“We have taken this approach to ensure UK-based investors and asset managers continue to have the freedom to find the best possible trading terms and to get the best outcome for themselves and their customers.”