The UK Financial Conduct Authority (FCA) has recently published a consultation paper on the systematic internaliser (SI) framework for bonds and derivatives (CP25/20). CP25/20 also contains a discussion paper on the current structure and transparency of UK equity markets and solicits views on how the market is currently operating ahead of a further consultation planned for 2026. 

CP25/20 builds on a policy statement published by the FCA in November 2024, which introduced new bond and derivative transparency rules for trading venues (PS24/14). Among other changes, PS24/14 removes the obligation on SIs to provide pre-trade transparency in bonds and derivatives from 1 December 2025, and gives effect to commitments made under the UK Wholesale Markets Review. 

In light of these changes, CP25/20 seeks feedback from market participants on the future of the SI framework, as well as other areas relevant to UK trading venues. Key proposals under CP25/20 include: 

1. abolishing the SI framework for bonds, derivatives, structured finance products and emission allowances on the basis that the removal of pre-trade transparency obligations for SIs in these asset classes makes SI designation largely redundant for these non-equity instruments; 
2. lifting the current prohibition on an investment firm that operates a multilateral trading facility (MTF) from engaging in matched principal trading on that MTF. The FCA emphasises that this proposal does not in and of itself mean that an MTF operator can conduct matched principal trading without holding the relevant permissions;
3. removing the restriction that prevents an investment firm classified as an SI from operating an organised trading facility (OTF) within the same legal entity;
4. permitting trading venues relying on the reference-price waiver to use a broader range of reliable, transparent prices (such as prices from the venue’s own market or a composite of venues) rather than being limited to the primary or most liquid market, with the aim of enhancing market resilience during outages and improving execution quality; and
5. seeking views on whether the reference price waiver should be reformulated so that it can apply to individual orders rather than to entire systems, thereby allowing prices for those orders to be derived from pre-trade transparent orders within the same order book, and enabling a wider set of liquidity to interact in a single liquidity pool instead of being fragmented in separate order books. 

The FCA confirms that it is not proposing changes to the equity SI regime in CP25/20.

CP25/20 also includes a discussion paper on the structure and transparency of UK equity market trading (the Discussion Paper). In the Discussion Paper, the FCA notes a shift in trading activity away from central limit order books (CLOBs) towards bilateral execution mechanisms and raises questions about the continued effectiveness of the current transparency framework. The FCA is not consulting on specific rule changes at this stage, but is seeking views on whether these developments raise concerns and warrant future reforms. 

Next Steps

The consultation period for CP25/20 closes on 10 September 2025. The FCA intends to finalise the changes on the SI framework for bonds and derivatives and the other reforms on matched principal, the reference price waiver and the operation of an OTF and SI in the same legal entity in a Policy Statement in Q4 2025. The FCA will use the responses to the discussion questions on reforms to equity transparency to inform the proposals that it intends to consult on in 2026.

CP25/20 is available here.