January Global Regulatory Brief: Trading and markets
The Global Regulatory Brief provides monthly insights on the latest risk and regulatory developments. This brief was written by Bloomberg’s Regulatory Affairs Specialists.
Trading and markets regulatory developments
Regulatory authorities continue to advance initiatives to improve the efficiency and sophistication of global market structure. The following market structure policy developments represent a sample of wider regulatory and policy coverage available to Bloomberg Terminal customers. Run REGS <GO> to find out more.
- USA: SEC adopts amendments to broker-dealer customer protection, net capital rules
- EU: ESMA launch selection procedure for bond Consolidated Tape
- UK: FCA consult on PISCES
SEC adopts amendments to broker-dealer customer protection, net capital rules
The U.S. Securities and Exchange Commission (“SEC”) adopted amendments to Rule 15c3-3 (the “customer protection rule”) to require certain broker-dealers to perform daily computations of net cash owed to customers and other broker-dealers. The Commission also adopted amendments to Rule 15c3-3 and Rule 15c3-1 (the “broker-dealer net capital rule”) to allow certain broker-dealers that perform daily computations to decrease their customer-related receivables, or “aggregate debit items,” charge from 3 percent to 2 percent in the computation.
Daily computations: The amendments to the customer protection rule will require broker-dealers with “average total credits” equal to or greater than $500 million to make the relevant customer and proprietary account computations daily. Prior to the amendments, broker-dealers were required to make such computations on a weekly basis.
Debit reduction: The amendments to the broker-dealer net capital rule allow broker-dealers performing daily computations – on a required or voluntary basis – to reduce the customer-related receivables charge (i.e., aggregate debit items charge) from 3 percent to 2 percent in the computation. Broker-dealers that choose to voluntarily perform daily computations are required to notify their designated examining authority.
Timeline: The amendments will become effective 60 days after the date of publication in the Federal Register. Broker-dealers that exceed the $500 million threshold using each of the 12 filed month-end FOCUS Reports from July 31, 2024, through June 30, 2025, must perform computations daily beginning no later than December 31, 2025.
ESMA launch selection procedure for bond Consolidated Tape
ESMA launched the selection procedure for the Consolidated Tape Provider (CTP) for bonds. Deadline to submit applications is February 7th. launched
The creation of CTPs is one of the core objectives of the MiFIR Review, which aims to enhance market transparency and efficiency by consolidating trade data from various trading venues and APAs into a single and continuous electronic stream. This consolidated view of market activity is expected to promote more efficient price discovery and trading in the EU.
Tentative timeline
- January: ESMA launches selection process
- July: ESMA to adopt a reasoned decision on the selected applicant (valid for 5 years)
- From July: Authorization process by ESMA
- Q1 2026: Bond CT to start operating
The selection process of the CTP for equity and ETFs is planned for June.
All the documents related to the procedure are available in this EU Commission website. Annex I on the selection criteria provides insights into ESMA’s thinking on a number of core issues around the CTPs operations.
FCA consult on PISCES
The UK Financial Conduct Authority has published its proposed framework for the Private Intermittent Securities and Capital Exchange System (PISCES). This is a new regulated trading platform for private company shares and is intended to enable intermittent trading of private company shares.
Important background: The growth in private markets is leading to investor demand for an organized marketplace to buy and sell stakes in private companies.
- As such, PISCES is a UK Government-sponsored initiative to bring some of the trading infrastructure used in public markets to private companies.
- Consideration has been given to the importance of protecting existing features of private markets where companies retain control and requirements and appropriate.
- The vision is to connect existing shareholders with a range of buyers, including institutions and certain sophisticated retail participants.
- The approach is to build and enhance private market practices rather than using public market standards as a starting point, the ‘private-plus mindset’.
Market abuse: The regulatory framework for PISCES will differ from other markets. Notably, the UK Market Abuse Regulation (UK MAR) will not directly apply to shares admitted to a PISCES platform.
- UK MAR would only apply in the limited circumstances where the PISCES share had an impact on the price or value of another financial instrument admitted to trading on a UK (or other in-scope) trading venue.
- The required core disclosure information will not be comparable to the level of information that investors may get from public companies.
Next steps: The consultation is open for written feedback until Feb 17 and the Treasury will issue the final legislation in May 2025. The FCA will then publish final rules.
The FCA will provide further information in early 2025 about pre-application engagement opportunities for firms interested in becoming a PISCES operator.
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