News & Analysis


Changes to UK MiFID – PS23/4

The Financial Conduct Authority (FCA) has released a Policy Statement (PS 23/4) outlining changes to equity secondary markets. These changes are part of the broader Wholesale Markets Review and have been developed in consultation with the government. The FCA’s amendments cover various aspects, including post-trade transparency reports, a new designated reporter status for over-the-counter (OTC) trades, waivers from pre-trade transparency, and the tick-size regime.

The amendments are detailed in the Technical Standards (Markets in Financial Instruments Transparency) Instrument 2023 (FCA 2023/19), which modifies UK RTS 1, UK RTS 2, and UK RTS 11. The new post-trade transparency requirements will come into effect in April 2024, while changes to waivers from pre-trade transparency and the tick-size regime will apply earlier.

The changes will impact reporting workflows for firms, requiring adjustments to content and timing when reporting trades. Current systematic internalisers and entities engaged in trade reporting should review the proposed designated reporter framework. Firms interested in becoming designated reporters will need to submit a notification to the FCA.

The FCA confirms several exemptions from post-trade transparency. The exemption related to transactions executed by portfolio managers under article 13(b) of UK RTS 22 will no longer apply to transactions executed by UCITS management companies and AIFMs. The exemption will be limited to investment firms carrying out portfolio management subject to MiFIR. Additionally, the FCA introduces exemptions for give-ups, give-ins in the context of market data requests, and inter-affiliate transactions. The latter exemption no longer includes specific risk management practices, removing the reference to centralised booking models.

The FCA has decided not to proceed with the proposed deferral that would allow trading venues to postpone the publication of transactions falling under Article 13 until the opening of the next trading day. The alignment between Article 13, Article 2, and Article 6 in UK RTS 1 will be streamlined by deleting redundant types of transactions while expanding the definition of a benchmark trade.

Regarding flags, the FCA retains certain flags such as “BENC” and “TNCP” while deleting others like “SIZE,” “ILQD,” and “RPRI.” New flags, such as “CLSE” for benchmark trades at the closing price and “PORT” for portfolio transactions, will be introduced. The existing flags for negotiated transactions will be aggregated into a single trade waiver flag, and a new flag (“NTLS”) will identify large-scale threshold negotiations reported off-book.

The FCA maintains its proposals for the “Price” and “Price currency” fields and introduces a new field called “Price conditions” populated with the pre-defined text “PNDG.” The implementation period for post-trade transparency requirements and the designated reporter regime has been extended to 12 months to allow firms sufficient time for system and process changes.

The designated reporter regime will allow firms to opt in at an entity level, regardless of their systematic internaliser status. The regime covers all financial instrument classes and imposes reporting obligations on designated reporters when trading with non-designated reporters. The FCA has made amendments to allow for bilateral agreements between designated and non-designated reporters.

Regarding waivers from pre-trade transparency, the FCA amends UK RTS 1 to allow trading venues to derive the most relevant market in terms of liquidity (MRMTL) price from non-UK venues, provided it is transparent, robust, and offers the best execution result. The FCA may further explore the methodology for calculating MRMTL and consider using a broader set of reference prices, including for shares traded in different currencies, once it gains wider powers.

The FCA will establish a subcommittee to develop good practices for outages in trading venues and may issue industry guidance. It also plans to introduce a consolidated tape for bonds and potentially equities to enhance market resiliency during outages.

The FCA is still seeking feedback on the UK market for retail orders, best execution, and the Retail Service Providers (RSP) system. Firms using the RSP system should clarify its use in their order handling or best execution policies, establish contingency arrangements for market volatility, and assess venue selection to ensure consistent high-quality execution for clients.

Please note that this summary provides a condensed overview, and it is advisable to refer to the original Policy Statement (PS 23/4) for full details and the latest updates.