The Financial Conduct Authority’s new consultation starts the delivery of two structural reforms for equities: it proposes allowing Multilateral Trading Facilities (MTFs) to deal as principal on their own order books, chiefly letting them cross blocks within a unique legal entity and asks for feedback on widening the reference-price waiver.
The FCA says: “In this consultation we propose three main changes… removing the prohibition on an investment firm to execute clients’ trades on the MTF they operate on a matched principal trading basis… [and] permitting trading venues operating under the reference price waiver to use a broader set of prices than just the primary market” .
Under the current Markets in Financial Instruments Directive (MiFID II) derivation, an MTF operator may not interpose itself between two clients on its own venue. The FCA concedes that the ban “resulted in additional costs for the operators’ group entity and their clients” and that lifting it “will reduce complexity and… deliver greater simplicity in the execution of trades”. The FCA therefore proposes to abolish the rule in order to let venues compete with Systematic Internalisers (Sis) when crossing blocks.
The FCA says: “This will enable more firms to offer competitive execution services without the need for contrived legal structures, thereby fostering innovation and reducing costs for end users”
On transparency waivers, the FCA writes: “We therefore propose to allow trading venues to source their reference price from a wider set of trading venues, including those not currently qualifying, and to combine prices from multiple venues”.
It also asks whether the waiver should move from a system-level to an order-level basis so that “mid-price, dark orders” can rest inside a lit book. The stated aim is to give venues “similar latitude” to dealers that reference their own SI quotes, improving competition without undermining price formation.
A FIX EMEA poll conducted in April saw market participants vote that the growth of bilateral trading is their top worry, prompting the FCA to “pledge caution” in any future equity reforms.
Read more: FCA pledges caution as industry voices concern over rise of bilateral trading.
The equity discussion paper focuses on market structure. It flags a structural shift. The FCA says: “An increasingly significant role for negotiated bilateral trading and a sustained decline in the share of trades executed on central limit order books (CLOBs)” is raising doubts about “whether fragmentation could impact the effectiveness and attractiveness of United Kingdom equity markets.”
CLOBs, the FCA notes, have long underpinned transparent price discovery, yet their share of addressable volume has fallen from 47 per cent in 2018 to 29 per cent in May 2025, prompting some of the FCA’s market contacts to warn that the trend “may be affecting, or could in future affect, the visibility of addressable liquidity and the resilience of price formation.”
On that basis the regulator asks whether the shrinking CLOB footprint is already distorting price signals and what steps might reinforce the order-book model’s role in setting public benchmarks.
The Financial Conduct Authority is clearly aware of the current debate around measuring accessible liquidity. “‘Addressable liquidity’ is not defined in regulation but is commonly used in the market to mean liquidity that participants could interact with,” the FCA says, before warning that studies which count only on-venue trades “could distort perceptions of the United Kingdom’s market depth and attractiveness” now that a growing share of flow is executed bilaterally. The FCA “invite[s] participants’ feedback on whether the reporting or the dissemination of trade data is limiting the ability of firms or issuing companies to fully understand the liquidity in the market” and, asks whether new compulsory trade-report flags or stricter use of existing ones are needed to isolate truly price-forming bilateral activity.
Read more: Aquis study prompts calls for standardised FIX flags .
Comments must be sent to the FCA by 10 September 2025; the FCA plans to “finalise the changes… in a policy statement in Q4 2025”. An exhaustive equity-transparency consultation remains scheduled for 2026. According to the FCA’s website notice, these reforms are intended to “support competition, reduce unnecessary complexity and improve market resilience”.
