The UK Financial Conduct Authority’s (FCA) July 2025 Consultation Paper CP25/20 marks a notable moment in the evolution of UK market structure. While the proposals span both equity and non-equity markets, the discussion around equity market transparency, the future of bilateral trading and the role of Systematic Internalisers (SIs) is likely to be of particular relevance to many of our clients and partners.
A Shift in Focus: Reassessing the SI Regime
One of the FCA’s headline proposals is to remove the SI regime for bonds and derivatives – a move they argue reflects how these markets now operate in practice, with post-trade transparency no longer dependent on SI status. The same logic is extended to other less central asset classes, such as structured finance products. While not the focus for most equity participants, this regulatory simplification underscores a broader shift: moving away from rigid classifications in favour of more targeted, functional transparency rules.
Rather than stepping back from transparency, the FCA is aiming to modernise it – adapting the regime to better reflect today’s increasingly fragmented and bilateral trading landscape. This is especially pertinent in equities, where questions around the visibility of liquidity, the role of Systematic Internalisers and the effectiveness of current transparency rules are now front and centre.
Bilateral Trading: Understanding the Landscape
A key theme in the consultation is the growth of bilateral trading, which the FCA links to the decline in Central Limit Order Book (CLOB) trading. The paper acknowledges concerns that bilateral trading – particularly when not clearly flagged or reported – may obscure market depth and price formation.
As we noted in our internal analysis, bilateral trading exists on a spectrum:
- Broadly defined, it includes any one-to-one negotiated trade that changes beneficial ownership, whether reported OTC, OTC/SI or off-book (on exchange).
- The latest trend, however, sees the buy-side increasingly going direct to risk desks – market makers, electronic liquidity providers or banks acting as SIs – bypassing traditional broker-mediated execution via exchanges or dark pools.
Both cases signal disintermediation from multilateral venues, challenging traditional notions of “market” and creating a perceived opacity that raises questions: “How do I know I traded at the right price if I never saw the real market?”
This underscores the need for more granular trade reporting. If we can’t always reroute execution back to lit books, we must at least equip market participants to “read the tape” effectively. This calls for consistent, accurate post-trade flags to segment activity for meaningful analysis – something we strongly advocate for across all our analytics solutions.
The Case for Better Data: Flagging and Visibility
The FCA recognises the limitations of existing flags like ‘SINT’ and ‘XOFF’ in conveying meaningful information – especially when large trades by SIs above the standard market size are flagged identically to small trades executed against pre-trade quotes. The proposal to refine the use of these flags – e.g., limiting ‘SINT’ to below-SMS trades – aims to improve signal quality in the post-trade tape.
We support this direction. Greater precision in flagging enhances addressable liquidity analytics – helping clients assess execution quality, track the presence and performance of liquidity providers and optimise trading strategies across fragmented markets.
Equity Transparency: Beyond the Venue Wars
Perhaps the most forward-looking part of the consultation is Chapter 4, which launches a discussion on equity market transparency ahead of formal reforms in 2026. Key questions include:
- Is the rise of bilateral trading (off-exchange, OTC/SI) undermining price formation?
- Should the equity SI quoting obligations be recalibrated to reflect actual trade sizes and practices?
- Can market participants clearly distinguish between price-forming and non-price-forming trades?
Again, data clarity is at the heart of these concerns. Where trades do not interact with an order book, their value in supporting price formation hinges on how they are labelled, disclosed and contextualised.
Our platform – leveraging high-quality normalised and transparent data analytics – is designed to meet this need. We believe in surfacing hidden liquidity patterns, correctly classifying activity and ultimately enabling smarter trading decisions across the buy- and sell-side.
Looking Ahead: What Should Change and Why
The FCA consultation is not just a regulatory housekeeping exercise. It opens the door to a more coherent, adaptive and competitive UK market structure – one that:
- Recognises the realities of bilateral execution
- Prioritises transparency that reflects how markets work today
- Encourages innovation by reducing unnecessary complexity
As an independent data analytics provider, we will continue to support both market participants and regulators in making sense of the evolving landscape. Our mission remains the same: to enable smarter decisions through better data quality.
Your Opportunity to Comment
We focus on providing independent, data-driven insights into how markets function. The questions raised in the paper around price formation, transparency flags and the visibility of addressable liquidity align closely with the themes we explore every day through our platform. This post shares our understanding of the consultation’s key proposals and how they intersect with our work supporting more transparent, competitive and effective equity markets.
It is important that this is an industry initiative; the FCA has invited comments on CP25/20 by Wednesday 10 September 2025. We encourage our peers and partners to respond – this is our opportunity to help shape a market that is both competitive and transparent.
For a copy of the consultation or to respond directly, visit FCA CP25/20.
To explore how our analytics can support your regulatory responses or market intelligence goals, please get in touch.
