How did the IA respond?
In July, HM Treasury issued the Wholesale Markets Review consultation, which closed for responses on the 24th September.
This consultation proposes a variety of changes to the UK regime for secondary markets to ensure that it reflects the UK’s position as one of the largest capital markets globally, as well as the UK’s commitment to high standards and proportionate regulation.
There is a focus on potential amendments to the Market in Financial Instruments Directive (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) regime, which was transposed into UK law as a result of the UK's departure from the EU.
The eight chapters cover trading venues, systemic internalisers (SIs), equity markets, fixed income and derivatives markets, commodity markets, market data, reporting, and cross cutting issues.
Key proposed changes include:
IA members have generally been supportive of the proposed reforms, which has helped shape our overall response. We agree with many of the changes set out in the proposal, and in particular, we support swift amendments to on shored regulations to ensure requirements remain appropriate for the UK market. Ensuring the secondary markets work well for the buy-side is a vital part of ensuring a strong investment ecosystem for clients and consumers. Our members support the intention to make some of the administrative aspects more proportionate, such as using qualitative rather than quantitative indicators where appropriate. We also agree the removal of the share trading obligation (STO) and double volume cap (DVC) are appropriate – they have not met the regulatory objectives of their introduction. We also believe it is important that government supports the development of a consolidated tape (CT), with a priority on fixed income to begin with. Ultimately, government should be aware that in addition to serving the UK market, a high proportion of IA members are established in the UK to serve a wider business that operates across borders. As such, any measure that create hurdles or barriers to cross-border business or adds additional cost, risks damaging the world-leading ecosystem that is established in the UK for businesses that operate in these markets. Overall, this consultation was also a good opportunity for us to reiterate key points from our other recent responses and wider priorities, such as the UK Listings Review, the transition to a low carbon economy, our position on Long Term Asset Funds (LTAFs), and the FCA’s consultation on the consumer investments market.
For more information on the IA’s Wholesale Markets Review consultation response, please contact: michael.jefferson@theia.org.