FCA Share Trading Obligation Allows UK Firms to Trade on EU Venues


The FCA has outlined its approach to the share trading obligation and will allow access to EU venues for UK market participants.

November 4, 2020 | AtoZ MarketsBritain’s Financial Conduct Authority (FCA) on Wednesday issued its guidelines towards the share trading obligations (STO). The FCA said it will use the Temporary Transitional Power (TTP) to avoid disruption and allow British companies to approach European Union (EU) exchanges for share trading at the end of the Brexit transition period.

The British regulator highlighted that only ‘mutual equivalence’ would guarantee the businesses to satisfy the STO obligations in both jurisdictions. And if not, the FCA will use the Temporary Transitional Power (TTP) to avoid disruption and allow firms to continue trading all shares on EU trading venues and systematic internalisers (SIs).

These guidelines from the UK watchdog come after the European Securities and Markets Authority (ESMA) said it will restrict share trading within EU after Brexit.

FCA STO guidelines allow UK companies to execute trades in the EU

While this approach allows UK market participants to access the EU trading venues post-Brexit, they will, however, need to ensure certain regulatory obligations.

According to the FCA, the guidelines will ensure an open market structure as the UK-based companies will be free to execute trades at the venues offering the best execution.

“At the end of the transition period, the UK’s and EU’s regimes will be the most equivalent in the world, but as it stands this has not been recognized by the EU,” FCA’s international executive director, Nausicaa Delfas said.

Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority said:

“At the end of the transition period, the UK’s and EU’s regimes will be the most equivalent in the world, but as it stands this has not been recognised by the EU. While we note ESMA’s recent clarifications to reduce the potential overlap of an EU and UK STO, we chose this simple and comprehensive approach rather than to replicate restrictions based on the jurisdiction of the share issuer, or the currency in which a share is issued.

‘We have taken this approach to ensure UK-based investors and asset managers continue to have the freedom to find the best possible trading terms and to get the best outcome for themselves and their customers. We want to preserve freedom for issuers from all jurisdictions to choose where and how to raise capital to support their business activities.

‘We remind all market operators in the EU that wish to continue to undertake regulated activity in the UK of the need to ensure they have the correct permissions in place.

‘The FCA will continue to take any necessary steps available to mitigate risks of disruption that may ensue from regulatory changes to ensure UK markets remain attractive to global investors with our open, interconnected and competitive regime.”

Turquoise, Cboe, and Aquis, which have set up EU hubs in anticipation of a clash in share trading requirements, had no immediate comment on the matter.

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