Rebalancing risk to fuel growth

Introduction

Consider a river carving its path through the landscape. It starts as a small stream, gradually gaining strength and direction over time. Its steady progress shapes the world around it.

We want our contribution to growing the UK economy to be like that river – quiet, persistent, and impactful.

The FCA recently released its 2025 to 2030 strategy[1]. Supporting growth is a key priority for our organisation. Maintaining and harbouring thriving UK capital markets benefits everyone.

A report published last year by the Capital Markets Industry Taskforce (CMIT) noted that the UK’s capital markets contribute over £100 billion annually in tax, enough to fund over half the annual budget of the NHS. A staggering statistic. Which makes our role to facilitate this contribution even more important.

We are committed to rebalancing risk across the industry which can spur growth. Decreasing regulatory burden is a focus. But not at the expense of consumer protection. There is a balance to be struck, and we need to hear from you to help us make those decisions.

We must get the balance correct between these two dynamics. It’s a challenge we are embracing and are excited about.

Prior to joining the FCA in 2024, I was on the ‘other side’ in a variety of different roles in capital markets across the world. After spending 15 years at the start of my career as a corporate bond trader, I moved into electronic trading in 2001, playing a key role in the launch of MarketAxess in Europe.

I then held several senior electronic markets roles at Barclays, RBC and Deutsche Bank, working closely with trading venues, data vendors and regulators to deliver services to clients of the banks. So corporate treasurers are no strangers to me. Quite the opposite. As former clients of mine, I know the parameters in which you are expected to flourish. I understand the pinch points and frustrations.

I want to listen and help to bridge the gap between market participants and the regulator. I have experience of both sides and want to help the UK’s capital markets thrive and develop in a way which is beneficial to all.

Collaboration

That leads me nicely into the first topic I would like to talk about: collaboration. We can’t deliver on our priorities alone. In order to succeed, we must collaborate and support others. That includes everyone here today.

This works both ways. I don’t want the first thought in a market participant’s head to be negative if they receive an email from me.

I’m not only in this role to police reporting requirements or pursue an individual for insider trading. Of course, these are crucial functions which contribute to clean markets. Clean markets encourage investment and growth.

But I am also here to help. To come up with solutions that can benefit the wider economy and market. I might want to talk about how we can assist with capital raising, how we help grow your businesses and the broader economy.

Our CEO stood here last year and spoke about growth. We have always been keen to facilitate growth and our new strategy underlines this. We are committed to enabling your businesses to access a range of sources of finance.

In order to achieve this, we need corporates to thrive. The continued growth and innovation of your businesses is crucial to the growth of the UK economy. Your companies are the lifeblood of the market. It is therefore vitally important that we collaborate with you. We look forward to continuing to do so.

As an example, I recently spoke with two CEOs. We discussed the obvious challenges of raising capital through a structure. We talked about whether it’s more attractive to go the private route. They were fantastic discussions and gave me a lot of food for thought. Without those conversations, we are less informed.

We don’t know what we don’t know.

The financial services landscape stretches far and wide. We may not be the correct body to speak to. But we can always refer information on or point you in the right direction. 

Reducing the reporting burden

Speaking of heading in the right direction, let’s get back to our river. I spoke earlier about gaining momentum and carving a path. We want to avoid, where possible, unnecessary obstacles.

I understand that reporting obligations can sometimes feel like one. It is time consuming – we know reporting is not just the filing of annual reports and accounts.

Across regimes, there are differing volumes and sometimes inconsistencies in those obligations. Especially when you add international considerations into the mix.

Things can quickly get complicated. And expensive. We want to work with you and get to a more beneficial position for all market participants. But we need to strike the correct balance.

Some obstacles are necessary. The pillars of a bridge, perhaps. Some reporting is crucial, and we use it every day to help us achieve our objectives. Transaction reporting data, for instance, is used to help combat and detect market abuse.

The European Market Infrastructure Regulation (EMIR) reporting allows us to identify and mitigate potential risks within our markets, particularly those arising from over-the-counter derivatives.

We want to ensure that any obstacles are useful, proportionate and serve a purpose. By providing key insights like I’ve just mentioned. 

If there is a more streamlined way of building those bridges, tell us. We realise the cost to you, but the value of the information provided is key for us in achieving our objectives.

Well-informed markets are good for everyone. When people are confident and well-informed, it means share prices are a fair reflection and will encourage trading in our markets. An increase in liquidity and trust in our markets can help us grow the economy together.

We know you may want to be allocating resources to other parts of your business. Gaining your input into our various consultation and discussion papers will help us shape our rules to enable you to do that.

I’d like to now run through a few key initiatives I’d be grateful for you all to consider contributing to, and to look out for. 

Fuelling growth

The FCA is working at pace to consult on new and existing regimes to assist growth. Since the implementation of our changes to the listing regime[2], we have continued our work to reform primary markets.

In July 2024 we published a consultation paper[3] with proposals for the regulations relating to admissions to regulated markets and primary multilateral trading facilities (MTFs).

At the same time, we also published proposals[4] on rules to support the new regulated activity of operating a public offer platform.

We consulted earlier this year on further proposals[5] to support these initiatives. We want to make our rules more efficient for companies issuing further securities. We are also proposing changes to our rules to align disclosure requirements for low denomination bonds with those for higher denominations.

These rules are designed to make it much easier for issuers to raise capital, fuelling growth and making a difference to people’s lives. 

Corporate bonds offer an alternative investment opportunity for retail investors and can provide a valuable contribution to later life income.

Currently, the minimum denomination requirement excludes many retail investors. We recognise there is a high threshold for companies to be able to issue lower denominated corporate bonds.

Taken together, these proposed changes aim to further promote efficient and effective capital raising by companies across debt and equity capital markets in the UK. This will encourage growth by providing wider access for investors to investment opportunities.

There is an opportunity for these new rules to make a real difference. It will create a wider investor base which can drive growth for your companies and the economy.

Stimulating UK capital market activity is a key aim for our organisation in order to contribute to growth. By reforming our rules, we hope to drum up business, increase liquidity and improve access to finance. Please do look out for our final rules which we hope to publish this summer. 

Embracing technology and innovation

Another theme I would like to discuss is digitisation. Our markets have long been developing in line with advancements in technology. We are committed to grasping the opportunities that new technologies bring. But we must manage the risks associated with that.

We are experiencing dramatic advancements in technology. Artificial intelligence could transform financial services. Financial markets can support businesses and consumers to make the most of technological progress.

We would like to hear from you on these topics, so please do look out for them. We want to hear from all parties as to how we can make the most of these opportunities and perhaps reduce costs for market participants.

Included in those topics is the future regulation of cryptoasset activities. Crypto is a growing industry and currently largely unregulated. A crypto regime that gives firms the required clarity to be able to safely innovate while delivering appropriate levels of market integrity and consumer protection is a must. Our aim is to drive sustainable, long-term growth of crypto in the UK.

The most recent FCA Discussion Paper[6] follows the publication of draft legislation by the Treasury that, once passed, will bring specific cryptoasset activities within the FCA’s regulation.

There is bound to be crossover with your world so please do reach out if you have any questions. We welcome all feedback, however big or small.

Where there is new technology, there are new opportunities. There is a lot of innovation coming – we want to be at the heart of it.

Please keep your eyes peeled and contribute where you can. Any future proof of concepts, for instance, will hugely benefit from your input.

We want to hear from you on issues such fund tokenisation and stablecoins. Enhancing liquidity, improving efficiency and diversification opportunities are just three potential benefits tokenisation could bring. Stablecoins may provide faster cross-border payments and lower transaction costs.

These topics bring opportunities, but as I have mentioned before, we must rebalance risk in an appropriate fashion. We are pro-innovation… but not at the expense of consumer protection. We will strive to find the correct balance.

And I’d just like to round up this up by mentioning a crucial change that will come round quicker than we all expect. The UK is set to transition to a T+1 settlement cycle[7]. This change is scheduled to take effect on 11 October 2027.

The Accelerated Settlement Taskforce (AST) has developed a plan to move to faster settlement of securities trades. This means if you buy a stock or bond, it will be settled within 1 business day.

Earlier this year, the government announced it accepted the AST’s recommendation to change the current T+2 requirement. T+1 will make our markets more efficient, and we support this. We will continue our supportive role as an observer to the AST, alongside the Treasury and the Bank of England.

The transition is part of a broader effort to enhance the efficiency of the UK’s financial markets. Faster settlement reduces risk attached to outstanding trades. A more efficient market will follow.

It also reduces counterparty risk. The move to T+1 will shorten the period which counterparties are exposed to each other, enhancing market stability. And the UK will ensure its settlement cycle is aligned with other major markets such as the US, Canada and Europe which are all moving towards, or have moved already to T+1.

The deadlines will come round extremely quickly and it’s so important to be ready. The AST have published their final recommendations which include 12 critical actions to assist with the transition. 

Please start planning and budgeting for the transition. Please do reach out if you have any questions or visit our dedicated T+1 webpage[7] which will document key updates.

Conclusion

Growth. It takes time. It requires favourable market and geopolitical conditions. Much like our river, which requires favourable conditions to make its way through the landscape.

We cannot guarantee thriving conditions for growth on our own. We are one part of the puzzle. What we can do is create certainty, remove burdens and ensure that we are consistently challenging ourselves to help facilitate growth.

Forgive me for briefly departing from my river metaphor – we know you can all work with goalposts and hit the target. You just need to know where that target is and have assurances that they won’t keep moving. By liaising with us, we can create the most optimal target possible for all market participants.

Those participants include consumers. We are equally as committed to improving lives by helping consumers as we are to growth. The rebalancing of risk in our markets will not disregard consumers.

Our plan is to become a smarter regulator: predictable, purposeful and proportionate.  We want to innovate and take on the right risks to encourage growth.  I would urge you to help us in that journey in any way you can. All insights, however small, are appreciated and will be considered.

Remember, even the mightiest river starts with a single drop.