FCA relaxes rules to rejuvenate listings

In an effort to reignite its public markets, the U.K.’s Financial Conduct Authority (FCA) is easing some of the investor protections in its listing rules.

The regulator unveiled a set of proposed reforms that aim to attract more public listings and boost competition by streamlining its rules for companies looking to go public.

Among other things, it’s doing away with the “premium” and “standard” listing segments, removing requirements that could deter early-stage companies from listing, easing curbs on dual class share structures, and scrapping required shareholder votes on certain issues.

“Our proposed reforms would significantly rebalance the burden of regulation to the benefit of listed companies and investors who are willing to set their own risk appetite and terms of engagement,” said Nikhil Rathi, chief executive of the FCA, in a release.

The reforms come in response to a 40% decline in public listings in the U.K. since the financial crisis — a trend that has also been complicated by the U.K.’s recent withdrawal from the European Union.

The FCA stressed that the decision to go public in a particular market isn’t just driven by regulation, it’s also affected by the tax regime and the availability of capital, among other considerations — at the same time, the U.K.’s listing rules have been criticized as too complicated and onerous, it noted.

“‘While regulation plays an important part, a company’s decision on whether, and where to list, is influenced by many factors so substantive change will require a concerted effort from government and industry as well,” Rathi said. “We want to encourage more companies to list and grow in the U.K., versus other highly competitive international markets.”

Alongside the proposed reforms to listing rules, the FCA is revising the rules that govern secondary markets too — also in a bid to boost competition.

Those changes aim to enhance execution quality, reduce trading costs, and boost liquidity. Among other things, they will remove restrictions on tick sizes, allow trading venues to rely on prices from overseas markets, and simplify reporting of over-the-counter (OTC) transactions.

At the same time, the FCA is introducing a new trade reporting regime that is intended to improve post-trade transparency and to create a simpler regime for OTC reporting. These reforms are due to take effect in April 2024, while other reforms to secondary market rules will come into force immediately.

Additionally, the regulator said that it will support an industry-led initiative to improve market resilience during trading venue outages, and will examine whether a formal review of retail trading is needed.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.