The FCA has published its policy statement on the UK post-trade transparency regime for bonds and derivatives, effective 1 December 2025. Through the changes, the regulator aims to further support market participants to offer liquidity and provide better, more timely transparency for the market.
The new regime has been developed following industry complaints that existing practices do not deliver meaningful transparency, have limited impact on price formation, and are high cost. Proposed changes were issued by the FCA in December 2023, with a consultation ending 6 March 2024.
Amendments to the proposal include the addition of a third deferral duration for bonds, the redefinition of bond grouping criteria, and the removal of negotiation-reliant systems from the scope of pre-trade transparency.
Three major changes have been made in the new regime, the first of which replaces transparency calculations with reliable proxies to determine whether an instrument can be categorised as liquid. Subsequently, the Financial Instruments Transparency System (FITRS) for bonds and derivatives will no longer be operational.
Systematic internalisers have been given a qualitative rather than quantitative definition, a change that the FCA does not expect to alter the existing designations of firms. Those currently listed as systematic internalisers must notify the FCA of their status again under the new definition.
The FCA is launching a further consultation on the systematic internalisers regime, welcoming responses to its discussion paper until 10 January and expecting to publish its findings in Q2 2025. Changes should go live in tandem with the post-trade transparency regime.
Trading venues have been provided with standards and criteria to guide their transparency requirement calibration. The FCA’s supervisory approach to exchanges now aims to reduce instances in which transactions that do not contribute to price formation are reported to the public, and improve the content of post-trade reports and the identification of derivatives.
The FCA advises trading venues, investment firms and approved publication arrangements to familiarise themselves with the rules and ensure that their current operations will be in line with the regime. During the transition between regimes, from 31 March pre-trade transparency will not need to be applied to voice and RFQ trading, and bond and derivatives systematic internalisers will not have to provide public quotes.
©Markets Media Europe 2024
