Chancellor Rishi Sunak has proposed removing several MiFID II restrictions inherited from the European Union including the share trading obligation and the double volume cap.
The ambitious reforms to the UK’s wider capital markets regime will be consulted on this summer. The aim is to help Britain attract more “dark” or anonymous trading by large investors after Amsterdam toppled London as Europe’s top share trading centre in January.
Speaking at UK Fintech Week, Sunak said, “The consultation process aims to deliver a rulebook that is fair, outcomes-based and supports competitiveness, whilst ensuring the UK maintains the highest regulatory standards.
He added, Britain would also recommend changes to companies’ share prospectuses to ensure the rules are “not overly burdensome.”
The Financial Conduct Authority (FCA) has already proposed easing double volume caps on dark trading to encourage large investment banks to return to London because they like the anonymity of dark pools for buying and selling big blocks of shares.
Last December, the FCA lowered the minimum amount for a dark transaction to well below levels in the bloc, where exchanges are lobbying for dark trading to be curbed further.
The Chancellor also set out proposals to enhance the UK’s competitive edge in fintech, from regulatory support and reforms to helping firms grow to a new taskforce to lead the UK’s work on a central bank digital currency.
He confirmed the UK will be taking forward many of the recommendations published in the recent Fintech Review, led by Ron Kalifa, and the Listing Review, headed by Lord Hill which aims to attract technology companies to list on London markets.
To support fintech firms to scale up, the FCA will develop a ‘scale box’ – a package of measures to enhance its regulatory sandbox, which has enabled start-ups to test new propositions, and to provide a one-stop shop for growth stage firms.
It will also launch the second phase of its Digital Sandbox to allow firms to test concepts that tackle sustainability and climate change-related challenges, helping to deliver a greener financial sector that supports the transition to net zero.
Sunak also backed the creation of an industry-led Centre for Finance, Innovation and Technology (CFIT) which will work closely with the regional hubs to identify and address sector challenges in support of fintech growth across the UK.
Moreover, FCA’s sandbox and HM Treasury will work together with the Bank of England to enable firms to explore how to use technologies like distributed ledger (DLT) to improve financial market infrastructure.
“The Treasury’s proposals are very positive for the UK’s finance and banking industry,” says Daniel Carpenter, Head of regulation at Meritsoft, a Cognizant company. “. With exciting, bold, and innovative measures outlined, there’s a real opportunity for leaders in capital markets to direct this creative energy to some of the areas where innovation has traditionally lagged behind – in post-trade, for example.
He added, “Whether it’s the low-tech and costly processes associated with onboarding and KYC, brokerage fees, trade settlement failures or transaction taxes, under investment has left a legacy of expensive inefficiencies in post-trade which are in need of attention.”
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