U.K. Proposes Break From MiFID Trading Rules to Boost Finance

(Bloomberg) -- The U.K. laid out plans Thursday to diverge from some of the European Union's landmark financial market regulations, arguing the rules are costly and holding back the City of London post-Brexit.

In its most detailed proposals about the future regulation of its capital markets since leaving the bloc in January, the U.K. Treasury said the EU's MiFID II regulations impose administrative burdens on traders and aren't suited to London's deep markets for stocks, bonds, derivatives and commodities.

“The government sees the U.K.'s departure from the EU as an important opportunity to ensure that we have regulation which is right for the U.K.,” the Treasury said in the 72-page consultation about the U.K.'s wholesale markets. “This is best achieved by amending the regime for secondary markets to ensure that it reflects the U.K.'s position as one of the largest capital markets globally.”

Proposed changes include removing “double volume caps” on the portion of share-trading that can occur on dark pools, arguing that they can lower transaction costs. The so-called share trading obligation determining where equities must be bought and sold would also be repealed under the plan.

In fixed-income markets, the proposal adjusts which derivatives must be traded on venues and seeks a “more tailored regime” for which deals are subject to price transparency rules.

Mansion House

The consultation was one of four documents released by the Treasury on Thursday, timed to coincide with Chancellor of the Exchequer Rishi Sunak's speech to finance executives at London's Mansion House, where he said hopes of winning equivalence rulings for access to the EU have dwindled and that the U.K. will now embark on its own plans to bolster the finance industry and create an “open and global financial hub” attracting business.

The possibility of London diverging from the EU's rules will further diminish the likelihood of the bloc granting equivalence decisions to the U.K. That could see more business and transactions move to the continent.

Since Britain fully left the EU at the start of the year, big banks have moved thousands of staff and hundreds of billions of dollars in assets to the bloc although London remains the largest finance center in the region, and is viewed by financiers as second only to New York as a hub in the world.

The Treasury is also starting a consultation on the U.K.'s prospectus regime, which aims to simplify regulation around the listing of companies. That includes more discretion on the documentation required when securities are admitted to trading on U.K. markets.

It also said that it will push forward quickly on an overhaul of Solvency II regulations for the insurance industry after firms pressed for changes in recent months. The Treasury is also consulting on how to ensure there remains widespread access to cash at a time when the economy is increasingly moving to contactless payments.