The trading environment of any country depends on the regulations put forward by the government – and it’s no secret that countries with investor-friendly measures attract more investments. In the UK financial sector, regulatory developments since Brexit have affected the future of trading. The focus has been on divergence opportunities and new regulatory frameworks. The UK has made several changes to its policies, all of which impact the trading environment. Learn how these new laws are changing the future of trading in the UK.
Overview of Recent Regulatory Changes in the UK Trading Landscape
After Brexit, every investor expected that changes would be made to the trading landscape in the UK. The government has introduced new frameworks for different aspects of investing, especially after diverging from the EU financial measures.
For instance, the asset management sector is experiencing significant changes due to the introduction of Consumer Duty and new investment advice. The new Consumer Duty is for financial firms and is meant to raise the standard of consumer protection in this sector.
The Fourth Industrial Revolution revealed a white paper outlining the UK’s ambitions. These include regulatory cooperation in trade agreements and adaptive regulatory practices. These are intended to enhance forex trading and regulate cryptocurrency and other securities.
The UK implements its regulatory decisions in tandem with advancements in economics, data, and technologies, and has recently implemented export controls on emerging technologies, including semiconductors. It has focused on trade agreements with other countries, and the government is expected to include regulatory cooperation criteria in these agreements.
Why Understanding New Regulations Is Crucial for Traders
It’s essential for all traders to fully understand new laws because this can impact trading later on.
For one, staying up to date with the latest legislative measures is essential. This can help traders adapt their strategies whenever the market changes. The trading world is known to be fast-paced, so staying ahead is the best way to make a profit.
Understanding the new policies can also protect traders. By learning about the laws, you can stay compliant and avoid paying fines and sanctions.
Regulations are essential to promote fair and transparent market practices, and traders who understand them can avoid manipulations and financial crises. When traders obey government limitations, they contribute to the stability of the financial market.
One of the new ways the UK has changed its regulations to adapt to the future of trading is through transparency and reporting.
The UK implemented comprehensive Disclosure and Transparency Rules. These rules require all companies trading in UK-regulated markets to disclose their financial information annually, ensuring transparency and accountability in corporate reporting.
Another regulation is MiFID II Post-Trade Transparency Reporting. Under this regulation, all investment firms in the UK must report trade details to Approved Publication Arrangements (APAs) at once. This measure protects investors and ensures market transparency.
The UK also has Sustainability Reporting Standards. This new regulation ensures corporate transparency on all environmental, asocial, and governance (ESG) issues and follows global sustainable goals.
The country recently announced the Smarter Regulation initiative, which focuses on streamlining non-financial reporting requirements. Recent proposals to enhance corporate reporting, especially in terms of improving internal controls and transparency, have also been made. These legislative measures focus on boosting investor confidence and transparency in investments.
Stricter Anti-Money Laundering (AML) and Know Your Customer (KYC) Rules
Since 2018, the UK has taken multiple steps to strengthen its anti-money laundering (AML) framework. The current AML laws have a system for reporting suspicious financial activity. This protects businesses from committing crimes and helps law enforcement investigate and gather intelligence.
In 2019, the government amended the Money Laundering and Terrorist Financing Regulations, which went into effect in 2012. The policies focused on businesses adversely affected by money laundering and terrorist financing, especially in the accounting sector.
The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations were introduced in 2020. They made several changes in the areas of reporting discrepancies, customer due diligence measures, and enhanced due diligence. For instance, now, firms have to apply due diligence measures to correspondent relationships as long as they involve payments.
In 2023, another new regulation was the Economic Crime and Corporate Transparency Act. This law focuses on preventing economic crime by strengthening transparency requirements. For example, it focuses on combating the abuse of limited partnerships and improves information sharing. It has also strengthened law enforcement powers to seize crypto assets.
Regulation of High-Frequency Trading (HFT)
The UK has also changed its legislative measures about high-frequency trading. One of the primary laws is MiFiD, which defines reportable securities. Authorised firms are meant to report the transactions to the FSA.
The UK also prohibits all forms of market manipulation, which is against the law as it generates profit from illegitimate sources. Laws in the UK require all financial firms to keep data in standard formats and make it available on demand. All suspicious trading orders must be reported immediately.
Future Outlook
The UK has recently paid close attention to its financial regulatory framework, which is expected to be highly important in 2024. Some areas of focus for the government include green finance and AI regulation.
The UK government has been focused on investments in environmental sustainability. The government’s interest in AI regulation was enhanced in 2024 and will continue in future years. With more active enforcement, regulatory scrutiny of AI would increase.
UK regulators are meant to increase their supervisory activities, especially in the areas of liquidity, anti-money laundering (ASML), third-party risk, cybersecurity, and operational resilience.
Staying Updated With UK Regulations for Trading
All traders must stay updated with the latest policies, even as the UK landscape changes post-Brexit. The country has focused on fighting crime and laundering in trading and enhancing transparency. The financial regulatory framework is expected to continue improving and concentrate on investor-friendly relations.
