By Huw Jones
LONDON – Britain will reform its financial markets “assertively” to attract trailblazing companies from across the world, though it won’t diverge from European Union standards just for the sake of it, the UK’s financial watchdog said on Tuesday.
While the UK’s full departure from the EU last December has largely isolated the City of London from Europe, it frees up Britain to write its own financial rules.
The finance ministry has said it will publish detailed proposals to reform capital markets later this year.
“Areas most in need of reform include market structure; the operation of the transparency regime; the regulation of commodity derivatives markets; and improving access to market data,” Financial Conduct Authority CEO Nikhil Rathi told City & Financial’s City Week event.
A government-backed review called for easing of listing rules to compete better with New York in tech floats.
There has been some investor concerns about introducing ‘dual class shares’ and lowering the minimum amount of a company that must be floated, but Rathi said the FCA will consult in July on removing barriers to listings without compromising on safeguards.
“We have an opportunity to act assertively to meet the needs of an evolving marketplace,” Rathi said.
“So, our consultation will include a wider discussion seeking views on the purpose of the listing regime and whether wider-reaching reforms could improve its effectiveness.”
So far the EU has granted very little direct financial market access for Britain, its financial services chief telling the same conference on Tuesday such an assessment would be gradual.
The lack of EU access has led to challenges like sterling money market funds, 90% of which are listed in the EU, being prohibited from depositing sterling with UK banks.
The ban on EU operators trading derivatives in London has also raised costs for EU firms, he said.
“We will in time need to consider the extent to which our objectives are at risk, and whether this state of affairs, with oddities such as this, is sustainable,” Rathi said.
EU access will hinge on whether the bloc deems UK rules to be ‘equivalent’ in robustness to EU regulation.
“We are not diverging just for the sake of it, we are ensuring appropriate safeguards and upholding – in fact, building on – high, internationally consistent and outcome-driven standards and this may well involve in some areas standards that are tougher than those in the EU,” Rathi said.