Capital Markets

Development of Consolidated Tapes

In December 2023 the FCA published a consultation paper CP23/33 on payments to data providers that will have to give data to the bond consolidated tape provider. The consultation proposes three options on potential payments to data providers.

The IA submitted a response to this consultation on 9th February 2024. Based on the feedback from members, the IA strongly opposes payments to data providers. Our members believe it will impact the viability of a consolidated tape and it will set a precedent for payment for regulatory compliance.

The IA also submitted a joint association letter with AFME and UK Finance stating strong opposition to any payments to data providers from the three trade associations.

Following the receipt of this consultation, in early April, the FCA issued a statement stating that payment to data providers will not be required.

FCA report on wholesale data markets

The FCA published its report on its Wholesale Data Market Study in late February 2024. The study, which was carried out in 2023, looked at competition across the provision of benchmarks, credit ratings agencies (CRAs) and the provision of market data vendor (MDV) services.

The report found no evidence that firms cannot access the wholesale data they need, and that in most cases this data is of sufficient quality. Despite noting the data markets are concentrated with limited competition, the FCA has ruled out significant intervention and has not referred the market to the Competition & Markets Authority. The FCA has also stated its market study will inform ongoing work on developing consolidated tapes, and will consider using existing powers under the Competition Act to address specific competition issues at firms.

Further information:

Hugo Gordon
Senior Policy Adviser
hugo.gordon@theia.org

Kenix Lee
Policy Lead
kenix.lee@theia.org

Anika Schaffter
Trainee
anika.schaffter@theia.org

IA website hub page can be found here.

The IA responded to the Market Study last year highlighting our industry’s significant concerns at soaring data costs, opaque pricing structures, and restrictive licensing conditions, and called for regulators to make reforms to address these issues. We are disappointed with these findings and will continue to push regulators and policymakers for further intervention on this topic.

Improving Transparency regime for non-equity instruments

The FCA published a consultation paper CP23/32 on improving transparency for bond and derivatives markets in December 2023. The paper proposes grouping sovereign bonds and corporate bonds with a number of factors to allow better separation of very liquid bonds for which higher transparency requirements can apply, from less liquid bonds for which longer deferrals would give the necessary protection.

A working group of members from the Fixed Income Trading Committee engaged closely with AFME members to shape deferral models that are acceptable to both the sell-

side and the buy-side. The two associations have reached a significant agreement on a proposal for future UK post-trade transparency model for corporate and sovereign bonds. The proposal forms a core part of each of our respective CP responses.

The proposed hybrid model includes two large-in-scale (LIS) thresholds and specific caps on the transaction volume that is published after a 4-week deferral (i.e. a mix between the two FCA models), and also replaces FCA Model 1’s middle tier of deferrals (price reported at 15 minutes and volume reported on T+3), with the reporting of price and volume at T+2.

The IA and AFME has since met with the FCA to further advocate our proposals.

UK Listings Rules

In December the FCA published consultation paper CP23/31 on proposals to amend the Listing Rules, with a view to improving the UK as a listing environment and attracting and retaining more companies to list, grow and do business here.

Further information:

Hugo Gordon
Senior Policy Adviser
hugo.gordon@theia.org

Kenix Lee
Policy Lead
kenix.lee@theia.org

Anika Schaffter
Trainee
anika.schaffter@theia.org

IA website hub page can be found here.

For the UK to remain globally competitive, innovation is key and in the IA’s response we supported the majority of the FCA’s proposals, including their plan to significantly reform the UK listing environment and to create a single segment for commercial company issuers of equity shares, replacing the previous premium and standard listing categories.

However, there are three specific areas within this consultation in which the FCA is proposing to remove certain key shareholder protections, which many IA members are concerned will diminish investment managers’ ability to conduct this vital role in delivering the best possible investment outcomes for end investors. These three areas are:

The removal of a shareholder vote for significant transactions;
The removal of a shareholder vote for Related Party Transactions;
The watering down of Dual Class Share Structure (DCSS) restrictions.

In our response we opposed these changes, while also endeavouring to put forward

meaningful solutions and alternative mechanisms which will seek to strike a more appropriate balance between:

UK competitiveness;
The needs of companies and their ability to raise capital on public markets;
The obligation on investment managers to deliver sustainable returns and protect the value of their clients’ investments; and
The needs of society and the economy to ensure growth and prosperity, while maintaining the integrity of, and confidence in, well-functioning public markets.

Specifically:

We propose the retention of shareholder vote for both significant transactions and related party transactions, but we suggest that the FCA could consider potential increases to the transaction thresholds requiring a shareholder vote, and a reduction of certain disclosure requirements relating to these transactions, in order to reduce any unnecessary burden on companies seeking to list in the UK.

Further information:

Hugo Gordon
Senior Policy Adviser
hugo.gordon@theia.org

Kenix Lee
Policy Lead
kenix.lee@theia.org

Anika Schaffter
Trainee
anika.schaffter@theia.org

IA website hub page can be found here.

We would like to see the existing regime for DCSS arrangements maintained for the most parts, but we suggest replacing the current requirement for a sunset clause for enhanced voting rights with a requirement for a review clause provision in DCSS arrangements at the point of IPO, mandating a continuation vote which could be triggered at a predetermined date.

The discussion around Listing Rules reform is just one part of a wider debate about the factors and drivers impacting UK listings and the wider capital markets competitiveness. The IA looks forward to working constructively with the FCA and indeed all key stakeholders to ensure a vibrant, healthy UK listings environment.

Electronic Trading Questionnaire

The IA and the Association of Financial Markets in Europe (AFME) have jointly updated our Equities Electronic Order Handling Questionnaire. The Questionnaire, first developed in 2016, provides a common framework for buy-side clients to request

information from electronic trading providers in the European equity markets, in order to improve transparency and efficiency. Following discussions between the IA (particularly the IA’s Equities Trading Committee) and AFME, this document has been updated to reflect the latest developments in regulation and market practice.

Private Markets

As investment in private assets has grown, private markets have become an increasingly important part of the IA’s work. In March the IA published a Private Markets Policy Briefing exploring key trends in private markets in recent years and the benefits of private markets to both investors, and to the UK as it seeks to scale up companies and meet its economic, environmental, social and infrastructure objectives.

In our Policy Briefing, developed with the IA’s Private Markets Committee, we note that barriers to private investment continue to

Further information:

Hugo Gordon
Senior Policy Adviser
hugo.gordon@theia.org

Kenix Lee
Policy Lead
kenix.lee@theia.org

Anika Schaffter
Trainee
anika.schaffter@theia.org

IA website hub page can be found here.

exist, and set out key opportunities and asks identified by the industry for opening up private assets investment and unlocking further capital to invest in the UK’s economy and infrastructure. These asks include:

incentivising pension scheme investment in a wide range of private assets
improving the infrastructure investment pipeline through a stable policy framework and the development of a National Industry Strategy
broaden access to private markets investment through innovation and evolution of the market, including:
the development of fund structures that remove barriers to investing in and holding private assets, such as the Long Term Asset Fund.
the development of a regulatory and market framework that encourages innovations such as tokenisation.

This Policy Briefing is part of the IA’s wider plans for engagement with policy makers, market participants and key stakeholders as we look to build a market that meets the UK’s needs.

Further information:

Hugo Gordon
Senior Policy Adviser
hugo.gordon@theia.org

Kenix Lee
Policy Lead
kenix.lee@theia.org

Anika Schaffter
Trainee
anika.schaffter@theia.org

IA website hub page can be found here.