On May 3, 2023, the U.K. Financial Conduct Authority published a Policy Statement on Improving Equity Secondary Markets, following its consultation last year. These changes are part of the response to the Wholesale Markets Review led by HM Treasury. Some of the changes from the WMR require legislative changes and are being progressed in the Financial Services and Markets Bill. We discuss these changes, and others proposed by the Bill in our client note, "UK Financial Services and Markets Bill". The changes that the FCA is bringing in do not require legislation or new powers for the FCA. The FCA confirms that it will consult this year and next on further reforms to the requirements for equity markets once the detailed firm-facing obligations are transferred to its Handbook.

The changes being made include:

• Removing the criteria for a firm to be registered with the FCA as a systematic internaliser for the reporting of all OTC financial instruments on behalf of clients. Instead, the FCA will introduce a new regime based on designated reporting firms. This will allow smaller firms to offer client reporting without needing to comply with the costly pre-transparency requirements applicable to SIs. Firms wanting to register as a designated reporter will need to submit a notification to the FCA.
• Permitting U.K. trading venues to use reference prices from overseas venues, provided those prices are robust, reliable and transparent.
• Permitting U.K. trading venues to use the same tick size used by overseas trading venues where the overseas venue is the primary market in a financial instrument.

The post-trade transparency requirements will enter into force in April 2024. The other changes apply immediately.

Regarding improving the resiliency of U.K. trading venues to outages, the FCA has established a sub-committee, which will work to prepare good practices for trading venues and investment firms.

On the execution of retail orders under the Retail Service Provider model (as proposed), the FCA will continue to discuss the issue with stakeholders since there are opposing views as to model's advantages and disadvantages.

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