By Huw Jones
LONDON (Reuters) – Britain’s markets watchdog said on Wednesday it was proposing to copy the European Union by exempting banks and brokers from the requirement to separately detail small business research from trading costs for investment managers.
Britain put all EU financial rules into UK law ahead of Brexit and is now examining what could be changed to keep the City of London globally competitive after being largely cut off from the EU since its full departure from the block on December 31.
The Financial Conduct Authority has said it will exempt research on companies with market capitalizations of less than Â£ 200m ($ 277.50m) from current unbundling rules aimed at shedding light on costs, provided whether it is offered on a “reorganized or free basis”.
The proposed change would increase search coverage for small businesses where there sometimes is none, the FCA said.
Material costs were unlikely to be passed on to customers, although small business research was subsidized by inflated business costs, the watchdog added.
Many investment managers are already absorbing the cost of research for their stock choices rather than passing them on to clients.
The FCA proposal follows a similar initiative by the EU as a whole of swift changes to the bloc’s MiFID II securities law with the aim of encouraging small businesses to raise funds in the markets for themselves. recover from COVID-19.
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As of December 31, Britain no longer has to apply EU financial rules, but UK regulators have considered whether to adopt the changes set out in the bloc’s quick fix package.
“Our analysis indicates that our proposed threshold of Â£ 200 million best targets SMEs with the lowest investment research coverage,” FCA said in a consultation paper.
The EU set a higher threshold of â¬ 1 billion, but the FCA said the UK’s threshold reflected FCA’s own analysis and different circumstances in Britain.
The FCA has also proposed to remove certain best execution requirements on trading platforms and investment firms that help investors see if they are getting the best deals.
Priorities for UK market reform will be transparency in equities, bonds and derivatives, the cost and distribution of market data and commodity derivatives markets, the FCA said.
(1 USD = 0.7207 pounds)
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(Reporting by Huw Jones; Editing by Alex Richardson and Louise Heavens)