Following its consultation earlier this year, the Financial Conduct Authority has published a policy statement setting out its final position on the new U.K. bond and derivative transparency regime. In response to feedback, the FCA has made multiple changes to its proposals, including:
- Modifying the post-trade deferral durations for bonds;
- Refining the grouping criteria for bonds; and
- Removing systems relying on negotiation from the scope of pre-trade transparency entirely.
The FCA intends to undertake a post-implementation review based on the first six months of data after application of the new rules. While the current legislative provisions that form the basis for the existing regime will be revoked on December 1, 2024, the FCA has provided a transitional provision to preserve the effect of the current regime until the new regime comes into force on December 1, 2025. During this transitional period, the FCA will continue to make liquidity determinations and update transparency thresholds for bonds and derivatives as it does currently. The FCA has also provided transitional provisions so that from March 31, 2025, trading venues will not have to apply pre-trade transparency to voice and RFQ trading, and systematic internalisers in bonds and derivatives will not have to provide public quotes.
Significantly, the policy statement includes a discussion paper on the future of the systematic internaliser regime. The deadline for responses is January 10, 2025. The FCA intends to consult further in Q2 2025 and make any resulting changes to the systematic internaliser regime so that they take effect alongside the new qualitative definition of systematic internaliser, which comes into force on December 1, 2025.
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