UK’s Financial Conduct Authority Has One Eye on Europe, One on Asia
The UK regulator has strong words for asset managers on best execution, while it builds bridges for fintech development with its Japanese counterpart.
Who would want to be a regulator? While I can’t claim to be acquainted with the intricacies of day-to-day life overseeing the operations of financial markets, on the surface it seems to be a thankless and often frustrating task.
This week UK regulator the Financial Conduct Authority (FCA) sent out a stark warning to asset managers on best execution practices, stating in a press release that “much of the poor practice outlined in its prior thematic review has not been addressed.”
In particular, the FCA pointed out that while asset managers “had management information that allowed them to accurately view equity execution costs,” the use of the information was inconsistent, and many firms “could not evidence any improvement to their execution process based on these data and the review of it was largely a ‘tick box’ exercise.”
Another point of contention for the FCA was that many compliance staff were not empowered by senior management to provide an “effective challenge to the front office on execution quality.”
As I wrote in my Mifid II: Best Execution May See Heads Roll feature last year, Mifid II will introduce a sizable shift in how best execution is measured and demonstrated, so it’s concerning to see the regulator making such an assessment of the buy side’s readiness, particularly given that its thematic review was carried out in 2014.
The FCA said it will return to the issue this year to evaluate what asset managers are doing to remedy the gaps in their best execution practices, but stopped short of mentioning any kind of enforcement action. Should the regulator find that the industry hasn’t sufficiently moved since 2014, or even worse, gone backwards, harsher action may need to be taken.
Reaching Out
While the FCA grapples with the UK buy side to improve its best execution practices, it also has an eye on the wider fintech community. The outcome of Brexit is still far from certain and until Article 50 is actually triggered, much will remain unknown.
There has been plenty of speculation about what will happen to the London’s status as the go-to European fintech hub once the UK withdraws from the European Union, but apart from the odd contingency plan being drawn up, most firms are having to remain patient until more details are made public.
In the meantime, the FCA is attempting to build relationships outside of Europe and its latest effort is to establish a framework to develop fintech firms and innovation with its Japanese counterpart, the Financial Services Agency of Japan (JFSA).
An exchange of letters between the two regulators was published this week, outlining a project to “provide a regulatory referral system for Innovator Businesses from Japan and the UK seeking to enter the other’s market.”
While similar frameworks have already been established by the FCA with other Asian regulators, Japan isn’t exactly famous for its financial services technology industry. Hong Kong and Singapore are the main two superpowers in Asian-Pacific when it comes to fintech, but perhaps the FCA is instead looking to reach out to any potential partners it can outside of Europe before the inevitable finally happens.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Regulation
Waters Rankings 2024 winner’s interview: S&P Global Market Intelligence
S&P Global Market Intelligence won two categories in this year’s Waters Rankings: Best enterprise data management (EDM) system provider and Best reporting system provider, which is the subject of this interview.
Preparing for the gathering storm
The Markets in Crypto-Assets (Mica) regulation came into force across the European Union on June 29 to enhance the transparency and integrity of the industry’s burgeoning crypto markets. Travis Schwab, CEO of Eventus, discusses his firm’s Mica strategy…
American Bankers Assoc. asks SEC: Do you know what you’re doing?
The industry group disagrees severely with regulators’ interpretation of the Financial Data Transparency Act, hinting at possible legal action in a recently published comment letter.
DORA will change the buy vs. build debate… maybe
Waters Wrap: With DORA’s deadline looming, trading firms are having to reassess their long-term tech strategies. Anthony wonders if that means more building and less buying.
The SEC needs a hand with artificial intelligence
The SEC wants to take a tough stance on AI, but it has a talent problem… or a marketing problem. Or both…
Off-channel messaging (and regulators) still a massive headache for banks
Waters Wrap: Anthony wonders why US regulators are waging a war using fines, while European regulators have chosen a less draconian path.
Banks fret over vendor contracts as Dora deadline looms
Thousands of vendor contracts will need repapering to comply with EU’s new digital resilience rules
Chevron’s absence leaves questions for elusive AI regulation in US
The US Supreme Court’s decision to overturn the Chevron deference presents unique considerations for potential AI rules.