LSEG challenges UK stock trading tape plan ahead of FCA decision

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LSEG challenges UK trading tape

Highlights

LSEG is lobbying the FCA to adopt a post-trade only tape and threatens to escalate to the government if the FCA moves forward with a pre-trade inclusive model, ahead of the regulator’s final decision in July.
LSEG warns that including pre-trade data in the UK consolidated tape could undermine market transparency and hurt its market data business, as investment banks may withhold information.
Only 33.5% of UK equity trades occurred on lit exchanges as of June 5, significantly below Europe’s 46%, intensifying LSEG’s argument that tape design should bolster visible trading.

Regulatory dispute before July decision

As reported by Reuters, London Stock Exchange Group is making a final effort to stop the Financial Conduct Authority from adopting a consolidated equities tape that would combine share prices and trades from multiple market participants in real time.

Julia Hoggett, chief executive of the London Stock Exchange, says she may appeal to the government if the FCA proceeds with the model proposed last year. In a blog post, she argues that limiting the tape to post-trade data would be a more prudent approach and says wider inclusion of pre-trade information could damage the UK market.

The FCA says the tape could strengthen Britain's appeal for stock market listings by showing more clearly the depth and vibrancy of trading activity. The regulator is expected to finalise its plans in July, after previously proposing that some pre-trade data, including the best bid and offer from UK venues that publish it, should be included.

LSEG also warns that adding pre-trade data, such as bids, offers and volumes before execution, could undermine transparency if investment banks do not contribute equivalent information. The exchange currently sells some of this data to investors, making the proposal commercially sensitive for its market data business.

Market structure and industry reaction

Hoggett says the UK is now near the bottom of international rankings for the proportion of equity trading that takes place on lit exchanges, where buy and sell orders are visible. She adds that this is partly because the FCA has made it easier than regulators in the U.S. and Europe for some trades to move off-exchange.

Data from BMLL Technologies show that on June 5 about 33.5% of UK equity trades take place on lit exchanges, compared with 46% in the rest of Europe. That gap has become a key part of LSEG's argument that the tape should support visible markets rather than weaken them.

The Association for Financial Markets in Europe, which represents banks, accuses LSEG of putting its own commercial interests ahead of the market's needs. UK Finance says investors, asset managers and banks support a tape with enough pre-trade data to be commercially viable, arguing that only a full pre- and post-trade tape would give investors a comprehensive view of prices and trading across venues while lowering costs and improving access to information.

An FCA spokesperson says the regulator is engaging closely with market users who strongly support the introduction of a tape. The watchdog says its objective is to keep UK markets open, competitive and attractive for trading, investment and listings.

Neil Woodford’s W4.0 dispute with the UK Financial Conduct Authority (FCA) highlighted the regulator’s view that the service may have crossed into unauthorised regulated investment advice and financial promotions. Our publication previously reported that W4.0 says it engaged with the FCA for months, adjusted its offering, and maintains it operates outside the regulatory perimeter, as Woodford also faces separate FCA action linked to the 2019 fund collapse.

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