UK unveils equity secondary markets reforms

FCA equity secondary markets Image credit: Shutterstock

The UK’s financial regulator has announced changes to equity secondary markets aimed at encouraging more activity in London’s public markets.

The Financial Conduct Authority (FCA) said it will lower trading costs, make equity secondary markets more transparent, and allow UK trading venues to reference company prices from overseas markets.

Primary markets are when securities in a company are issued for the first time, such as an IPO. Secondary markets are when previously issued securities are traded by investors.

The changes are being made as a result of the Wholesale Markets Review and will affect trading venues, investment firms and UK branches of overseas firms undertaking investment services and activities.

It comes as part of a wider attempt to encourage more London tech IPOs. The UK Listing Review found there has been a 40% reduction in the country’s IPO since 2008. Notable tech companies including Cambridge chip designer Arm have opted to IPO in the US over the UK.

Speaking at Business Connect last week, Prime Minister Rishi Sunak said in addition to reforms there would need to be a “change in risk appetite” among UK institutional investors, such as pension funds.

The FCA this week proposed separate changes to listing requirements to attract more London listings.

Starting in April of next year, the FCA has created a new Designated Reporter regime responsible for all trades being made public.