The Financial Conduct Authority (FCA) has published its 2024 Supervisory Strategy for trading venues, clearly focusing on operational resilience, market orderliness, and fostering innovation and growth. This strategy signals the regulator’s heightened expectations for Recognised Investment Exchanges (RIEs), Multilateral Trading Facilities (MTFs), and Organised Trading Facilities (OTFs). Here, we examine the implications of the FCA’s strategy and outline the steps trading venues should take to ensure compliance and continued competitiveness.

Implications for Trading Venues

  1. Operational Resilience The FCA has stressed the importance of operational resilience in safeguarding the UK’s financial markets. Trading venues in scope of Policy Statement 21/3 Building Operational Resilience must:
  • identify and document their important business services;
  • set clear impact tolerances to measure operational disruptions; and
  • map and test their systems and processes to ensure these tolerances are met by the deadline of 31 March 2025.

The FCA has also noted an increasing risk from cyber threats and third-party dependencies, urging trading venues to address vulnerabilities proactively. To this end, trading venues outside PS21/3 can still expect interactions with the FCA regarding their operational resilience arrangements.

  1. Market Orderliness In light of recent market stress events, the FCA expects trading venues to:
  • enhance mechanisms for managing market volatility; and
  • maintain robust monitoring of participant activities to prevent disorderly trading.

Trading venues should also prepare for discussions with the FCA on how new technologies, including artificial intelligence, are integrated into their trading systems. The regulator will closely scrutinise these systems to ensure they support market stability.

  1. Innovation and Growth The FCA’s focus on reducing barriers to entry and tailoring regulations to encourage market competitiveness presents an opportunity for trading venues to:
  • foster greater liquidity;
  • innovate their product offerings; and
  • attract new participants to the market.

However, this also necessitates careful balancing to avoid compromising regulatory compliance in pursuit of growth.

Next Steps 

To align with the FCA’s expectations, trading venues should:

  1. Conduct a Comprehensive Review of Operational Resilience
    • Ensure that mapping and testing activities are well underway.
    • Identify gaps in resilience and invest in improved processes, training, and infrastructure.
    • Update contingency and recovery plans to address identified vulnerabilities.
  2. Strengthen Market Orderliness Frameworks
    • Review and refine volatility management mechanisms.
    • Enhance systems for monitoring participant behaviour and addressing misconduct.
    • Stay ahead of technological advancements and integrate them responsibly.
  3. Leverage Opportunities for Innovation
    • Assess current barriers to entry and explore ways to enhance market accessibility.
    • Engage with stakeholders to identify areas where tailored regulatory approaches could drive growth.
  4. Board-Level Engagement
    • Discuss the FCA’s supervisory strategy at the board level.
    • Conduct risk assessments to evaluate how the identified priorities apply to your operations.
    • Develop and implement a robust action plan to address these risks.

Talk to Us

At CG Regulatory Solutions, we specialise in helping trading venues navigate complex regulatory landscapes. Whether you need support with operational resilience, market orderliness, or innovation initiatives, our team is here to assist. We offer tailored advice and practical solutions to ensure you meet the FCA’s expectations while positioning your venue for growth.

If you have any questions or require further guidance, please get in touch with us. Let us help you turn regulatory challenges into strategic opportunities.

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