UK Financial Markets Reform: FCA Consultation Targets Trading Venue Flexibility and Transparency

The UK Financial Conduct Authority (FCA) is pursuing a series of reforms to the nation’s wholesale markets, aimed at reducing compliance burdens and fostering a more competitive trading environment. According to the FCA’s Consultation Paper CP25/20, published on July 4, 2025, the regulator is proposing to expand the use of reference prices and matched principal trading for venues, while eliminating the systematic internaliser (SI) regime for non-equity instruments.

Proposed Changes to Trading Venue Rules

The FCA’s latest proposals seek to move away from rigid market structures that the regulator believes have failed to deliver meaningful pricing improvements. Building on the 2023 Wholesale Markets Review, the FCA is looking to provide trading venues with greater flexibility.

Under the proposals in CP25/20, venues would be permitted to make broader use of reference prices and matched principal trading. By removing these specific cost and operational constraints, the FCA aims to encourage efficiency and support better liquidity and price formation. These reforms are part of the regulator’s broader 2025-2030 strategy, which emphasizes the goal of becoming a “smarter regulator” to bolster market integrity and attract global capital.

Streamlining Non-Equity Transparency

A significant portion of the FCA’s regulatory shift involves the systematic internaliser (SI) regime. The regulator has already taken steps to recalibrate transparency requirements through Policy Statement PS24/14, which removes pre-trade transparency requirements for SIs in bond and derivative markets.

This policy, which becomes effective in December 2025, replaces rigid quantitative thresholds with a qualitative definition. By doing so, the FCA eliminates the requirement for firms to identify themselves as SIs for non-equity instruments. These changes represent a direct effort to reduce the compliance overhead for firms operating within the UK wholesale market.

Market Evolution and Future Outlook

The current regulatory agenda reflects a push toward a more dynamic UK market environment. While the FCA focuses on streamlining reporting and venue flexibility, other global developments in digital finance are also influencing the sector.

For instance, recent legislative changes in the UK have formally recognized digital assets as property under English law. This move serves as a foundational step for the legal treatment of tokenization and digital-asset settlement. As the UK market adjusts to these new transparency and venue rules, firms are expected to see reduced complexity in their day-to-day operations. The FCA’s approach signals a clear intent to move away from the MiFID II/MiFIR transparency regime, which the regulator concluded did not provide the intended benefits for bond and derivative market participants.

Key Takeaways

• Consultation Paper CP25/20: Released on July 4, 2025, this paper outlines the FCA’s proposals to increase flexibility for trading venues.
• SI Regime Reform: The FCA is scrapping the systematic internaliser regime for non-equity instruments to lower compliance burdens.
• Policy Statement PS24/14: Effective December 2025, this policy removes pre-trade transparency requirements for bonds and derivatives.
• Strategic Goal: The reforms align with the FCA’s 2025-2030 strategy to improve market efficiency, support sustainable growth, and enhance the UK’s global competitiveness.

As the FCA moves forward with these consultations, market participants should prepare for a transition toward a more qualitative regulatory framework. The success of these reforms will likely be measured by the resulting improvements in market liquidity and the ability of UK venues to compete on a global stage.