Regulatory Strategy 2009

As one of Europe’s leading diversified exchange groups, London Stock Exchange Group is an active participant in international and domestic regulatory debates.

This page contains links to recent submissions and responses on behalf of the Group, or certain entitites within the Group.

November 2009

Response to CESR's consultation on trade repositories in the European Union London Stock Exchange Group agrees that the establishment of trade repositories could be an important step in the development of tools that allow regulators to have access to more information regarding trading in derivatives markets. In particular we understand their need to be able to obtain a clear understanding of the size of the market, the number of transactions, the size and risk profile of outstanding positions and their potential impact in the event of a default or systemic failure. However, we believe that for any system of trade repositories to be fully effective, a critical part of the exercise will be determining the requirements for the system and processes to be applied in collecting and analysing the information. Material submitted to a TR must be in a standard, consistent format, capable of being interrogated and delivering meaningful and comprehensive reports and analysis. Without this, the ability of regulators to build their understanding of the market will be compromised. 

October 2009

Response to HM Treasury’s consultation on notifying trading suspensions in the market London Stock Exchange Group has responded to HM Treasury’s consultation on notifying trading suspensions in the market. Broadly, we are supportive of HM Treasury’s proposed use of RISs to disseminate information on the suspension of financial instruments from trading, as this would facilitate the suspension of OTC trading, which is not currently possible for practicable reasons.

August 2009

Response to the European Commission's consultation on possible initiatives to enhance the resilience of OTC derivatives markets London Stock Exchange Group has responded to the European Commission's consultation on possible initiatives to enhance the resilience of OTC derivatives markets. We agree with the Commission's objective of seeking to strengthen the safety of derivatives markets and assess how risks can be reduced. We believe that transparent markets facilitate the achievement of this objective as well as assisting in price determination and improving market efficiency. The trading of derivatives via public order books should be encouraged, however we recognise that not all products are suitable for exchange trading and there will continue to be a need for an OTC derivatives market, albeit subject to appropriate levels of transparency and controls. We also note that the Commission needs to be mindful of the potential systemic risks arising from seeking to bring some of the more complex products (notably Credit Default Swaps) on to CCPs and, in particular, the resulting concentration of risk in key market infrastructure providers.

July 2009

Response to the Rowlands Growth Capital Review London Stock Exchange Group has responded to the Rowlands Growth Capital Review from the Department for Business, Innovation and Skills. In our response we highlight the role of AIM in providing finance for UK SMEs, but explain that financing gaps still exist, many of them exacerbated by the current recession. Finally, we set out the policy measures that could be taken by government to improve access to finance for SMEs. This largely comprises changes to the Venture Capital Trust regime in the UK.

May 2009

Response to the FRC's Review of the Effectiveness of the Combined Code: Call for Evidence Reflecting feedback from a variety of Primary Listed, Main Market companies and their advisers, London Stock Exchange Group has responded to the FRC's call for evidence as part of their review of the effectiveness of the Combined Code,  in which we reinforce the success of the principles-based, 'comply or explain' approach and stress that the Code has a direct bearing on our markets as all UK-domiciled, Primary Listed Main Market companies are required to report on their application of the Code.

Response to IOSCO’s Consultation on Direct Electronic Access (“DEA”)  London Stock Exchange Group has responded to IOSCO’s consultation, in which it outlines possible principles for DEA. We broadly agree with IOSCO’s proposed principles, which are in line with the principles underpinning Order Routing and MAC.

Response to the FSA's consultation on short selling London Stock Exchange Group has responded to the FSA's Discussion Paper 09/1 on the regulation of short selling. We are pleased that the FSA recognises the benefits of short selling to market efficiency and does not seek a ban or other structural changes to constrain the activity. While supporting greater transparency around short selling in principle, London Stock Exchange Group does not necessarily support the FSA's proposal for a regime requiring public disclosure of individual net short positions. We ask for more information about the FSA's policy objectives to be able to comment in more detail on any transparency regime.

Response to IOSCO consultation on short selling: London Stock Exchange Group has responded to the consultation by IOSCO which outlines 4 principles for the effective regulation of short selling. London Stock Exchange Group is supportive of the proposed principles and IOSCO's efforts to develop a more consistent international approach.

April 2009

IOSCO Hedge Fund Oversight Consultation Report London Stock Exchange Group has responded to IOSCO's consultation report examining regulatory approaches to hedge funds. In our response, we acknowledge the need to examine vulnerabilities in the global financial system, but stress the need to avoid inappropriate or excessive regulation where there is little evidence of market failure. We suggest that in line with the G20 requirements, any analysis should focus on issues of systemic importance as the priority. Finally, we note that London is the second largest global centre for hedge fund managers and as such the development of industry best practices should take particular note of the views of the major trade bodies located here as well as the Financial Services Authority.

March 2009

HMT consultation on the legislative framework for the regulation of alternative finance investment bonds (sukuk) London Stock Exchange Group welcomes the opportunity to respond to this joint consultation between HM Treasury and the FSA.  London Stock Exchange Group has played a pivotal role in establishing the UK as a gateway for global Islamic finance and promoting London’s international competitiveness.  

We agree with the move to align the regulatory treatment of alternative finance investments bonds with conventional debt securities and support the proposal for AFIBs to be subject to a mandatory listing requirement.

Response to the European Commission’s consultation on the review of the Prospectus Directive (Directive 2003/71/EC)  London Stock Exchange Group has responded to the European Commission’s consultation on the review of the Prospectus Directive (PD). London Stock Exchange Group welcomes the work undertaken by the Commission to reduce administrative burdens on issuers but thinks a number of improvements can still be made to simplify the application of the PD, particularly for small companies and pre-emptive offers.

Response to FSA’s Consultation Paper on the Structure of the Listing Regime London Stock Exchange Group has responded to the FSA’s Consultation Paper CP 08/21 “Consultation on Amendments to the Listing Rules and Feedback on DP08/1 (A Review of the Structure of the Listing Regime)".

February 2009

Response to UK Debt Management Office Consultation on Supplementary Methods for Distributing GiltsLondon Stock Exchange Group has responded to the DMO's proposals regarding the potential introduction of additional distribution methods to supplement gilt auctions.

Response to BERR's consultation on the implementation of the Shareholder Rights Directive London Stock Exchange Group has responded to BERR's consultation on the exercise of certain rights of shareholders in listed companies. We support BERR's proposals and the work that has been conducted to incorporate our feedback from earlier negotiations regarding the Directive's implementation. We comment on the notice period for EGMs and the need for clarity on the definition of electronic voting.

Response to the European Commission consultation on hedge funds London Stock Exchange Group has responded to the European Commission consultation on hedge funds. Whilst recognising that there is a need to examine vulnerabilities in the global financial system, there is also the need to avoid the temptation to over-regulate specific areas of the financial markets where there is little material evidence of market failure but where inappropriate and hurried regulatory intervention may damage the long term efficacy of public capital markets.

January 2009

Response to the FSA's consultation on rights issue subscription periods London Stock Exchange Group has responded to the FSA's consultation on shortening rights issue subscription periods.

Response to FSA’s Consultation Paper on Disclosure of Contracts for Difference London Stock Exchange Group has responded to the FSA’s consultation on a disclosure regime for Contracts for Difference (CFDs).

We generally support the FSA’s proposals to increase transparency on CFDs and we agree the scope of the regime should be extended to similar economic interests. However, we encourage the FSA to consider the Transparency Directive approach of disclosure of full notional exposure for countering anti-avoidance issues.

Response to CESR’s call for evidence on the regulation of short selling London Stock Exchange Group has responded to CESR’s call for evidence on the regulation of short selling. We strongly support CESR in working to achieving greater convergence between CESR Members in the short-selling space.

We believe that bans on short selling are both ineffective in countering concerns about market volatility, and damaging to the wider interests of market participants. However, we recognise that other measures may be desirable, such as increased disclosure.

Response to CESR’s call for evidence on the impact of MiFID on the functioning of equity secondary marketsLondon Stock Exchange Group has responded to CESR's call for evidence on the impact of MiFID on the functioning of equity secondary markets. CESR is gathering views in anticipation of a formal European Commission Review – the findings of which will be published in 2010. The Exchange has been active in the formation of MiFID since the process first began over eight years ago. The review of how well MiFID is functioning is naturally an area of considerable interest to us. We believe the key question behind the reviews should be whether the market since MiFID’s introduction is fundamentally a better one. In our response, we highlight a number of issues such as the lack of a level playing field between venues: especially in relation to pre-trade transparency requirements.

Response to FSA consultation on temporary short selling measures London Stock Exchange Group has responded to the FSA's consultation on temporary short selling measures. We welcome the decision to lift the Ban on short-selling and we support the decision to retain the Disclosure Obligation in the short term. We look forward to contributing more fully to the debate on the detail of any long term disclosure regime in the forthcoming comprehensive review.

The Effect of Short-selling Restrictions on Liquidity: Evidence from London Stock Exchange London Stock Exchange Group has commissioned research by Capital Markets CRC Limited on the effect of FSA's short selling prohibition on market quality. The research compared those FTSE 100 companies that are subject to the prohibition, against a control sample of those FTSE 100 securities that are not within the scope of the prohibition. The research indicated that market quality (defined as price volatility and liquidity) was reduced in the affected stocks in the period following the ban.