FCA PS25/17: The SI regime for bonds and derivatives including Discussion Paper on equity markets
On 28 November 2025, the Financial Conduct Authority (FCA) published Policy Statement 25/17: The SI regime for bonds and derivatives including Discussion Paper on equity markets (PS25/17).
Background
In November 2024, the FCA published Policy Statement 24/14 which introduced new bond and derivative transparency rules for trading venues from 1 December 2025. The regulator also included in chapter 9 of the Policy Statement a short section for discussion on the future of the systematic internaliser (SI) regime.
On 4 July 2025, the FCA issued Consultation Paper 25/20: Consultation Paper on the SI regime for bonds and derivatives including Discussion Paper on equity markets (CP25/20). In CP25/20 the FCA proposed the following changes:
- Removal of the SI regime for bonds and derivatives, as well as structured finance products and emission allowances.
- Removing the prohibition on an investment firm to execute clients’ trades on the multi-lateral trading facility (MTF) they operate on a matched principal trading (MPT) basis.
- Removal of the prohibition on an investment firm that is an SI from operating an organised trading facility (OTF).
- Permitting trading venues operating under the reference price waiver (RPW) to use a broader set of prices than just the primary market, or the most relevant market in terms of liquidity, to cross orders under their systems; this would also include allowing the use of the RPW within the same system where the price is derived from.
The deadline for comments on CP25/20 was 10 September 2025.
Final policy
In PS25/17 the FCA sets out its final policy and comments on the feedback it received to CP25/20.
Key points include:
- The FCA is proceeding with its proposal to remove the SI regime for bonds, derivatives, structured finance products and emission allowances. It acknowledges the feedback and the support from the vast majority of respondents for this proposal.
- The FCA is removing the prohibition on MPT by appropriately permissioned investment firms operating an MTF. The FCA is of the view that the potential risk arising from an MTF operator engaging in MPT can be managed through the arrangements required by the broader conflict management rules to which an MTF operator is subject to. The FCA also confirms that the use of MPT by an MTF needs to remain consistent with the objective and non-discriminatory rules that characterise the operation of MTFs.
- The FCA is removing the prohibition on an investment firm that is an SI from operating an OTF. The FCA will revise MAR 5A.3.1R(3) to reflect this change and clarify that firms may operate both an SI and an OTF within the same legal entity, subject to existing safeguards. The FCA also highlights that investment firms are already able to operate MTFs while being SIs in the same instruments. However, the main difference is that MTFs operate a multilateral system based on non-discretionary rules, whereas trades on OTFs are carried out on a discretionary basis. That said, the FCA would expect that clients of the OTF be made aware of activities that the operator carries out in a principal capacity outside the OTF and to manage any conflict in line with conflict management provisions, which may include providing transparency to clients where an OTF operator also carries out SI activity.
- The FCA is reforming the RPW to allow trading venues to source prices from a wider set of venues provided that the reference price is widely published and regarded by the market as reliable. The FCA notes that almost all respondents supported this. However, the FCA reports that there were mixed views regarding a further proposal to reformulate the waiver so that it applies to individual orders rather than entire systems, enabling mid-price dark orders to be placed within a lit order book from where the reference price is derived. The FCA will undertake further discussions on this and is proposing only to implement the change following consultation on how to best identify the execution of dark orders at a reference price within lit order books, including through the use of the appropriate flag or identifier so that there is no loss of information from post-trade transparency. The FCA will do this in 2026 as part of its planned consultation on equity market structure and transparency.
Next steps
The FCA states that the changes in PS25/17 are permissive and create no new obligations on firms unless they chose to avail themselves of the new opportunities afforded by the changes. Firms so choosing should review the final rules and assess any operational or compliance updates needed.
From 1 December 2025, the SI regime for bonds, derivatives, structured finance products and emission allowances will be repealed. The other changes come into effect from 30 March 2026.
Following on from chapter 4 of CP25/20 – the discussion paper on equity markets – the FCA will keep considering the responses. It will publish a consultation on equity markets in the first half of 2026.