FCA considers scrapping MiFID rules for small-caps

The Financial Conduct Authority (FCA) has revealed that it is considering removing MiFID regulations on research for firms with a market up that falls under £200 million. This upcoming decision is one of a few new proposals being collated to reduce the burden placed upon small investment firms at this time, and to improve the competitive market for UK financial companies.

Introduced in the EU in 2007, MiFID in the UK is the group of laws and regulations which dictate the organised trading, selling and buying of financial instruments. Since their inception, these rules have burdened investment firms of every size with a significant compliance task.

The Financial Conduct Authority is in continuous work with HM treasury to reform capital markets.  The regulators have now announced that it intends to adjust any rules that do not appear to be achieving objectives in the most efficient manner.https://www.leaprate.com/financial-services/rules-and-regulation/fca-warns-against-cmc-capital-and-fastcryptofx-clones/

FCA regulation

The FCA now proposes to alter current research-related inducement rules in order to broaden the list of “minor non-monetary benefits”. This list will be set to include research on SMEs with a market cap of less than £200m, so that the rules will no longer limit it. FICC research, often associated with difficulties in applying MiFID requirements, will also avoid the inducement rules.

The FCA is also suggesting changes to rules on how inducement regulations apply to open research, and research which independents provide. Separately, the regulator is proposing to remove two sets of MiFID reporting requirements, including removing obligations on execution venues to publish reports on execution quality metrics.

It also hopes to eliminate obligations on investment companies that execute orders to generate annual reports highlighting popular venues utilised to execute customer orders, and an overview of the achieved execution outcomes.

Speaking of its new proposals, the FCA stated:

We expect these to have positive impacts arising from improved research coverage. An increase in asset manager interest and liquidity for SME firms may result.

The FCA added:

We recognise some potential impacts on competition, such as pushing trading to brokers offering execution and research rather than just execution and reduced price transparency. But we consider the effects are likely to be limited given the current low levels of research for firms of this size.

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