April Global Regulatory Brief: Trading and markets
The Global Regulatory Brief provides monthly insights on the latest risk and regulatory developments. This brief was written by Bloomberg’s Regulatory Affairs Specialists.
Trading and markets regulatory developments
Regulatory authorities continue to advance initiatives to improve the efficiency and sophistication of global market structure. The following market structure policy developments represent a sample of wider regulatory and policy coverage available to Bloomberg Terminal customers. Run REGS <GO> to find out more or contact your Bloomberg representative to learn more:
- EU: ESMA final draft rules on order execution policies under MiFIR/D review
- Korea: South Korea fully reinstates short-selling
- UK: FCA issues first fine against a Recognised Investment Exchange
- India: SEBI consults on uniform expiry days for equity derivatives
ESMA final draft rules on order execution policies under MiFIR/D review
ESMA published its final draft technical rules on the criteria for establishing and assessing investment firms’ order execution policies, the new best execution regime under the revised MiFIR/D.
New requirements: The new rules set requirements on:
- The establishment of an investment firm’s order execution policy; including the classification of financial instruments in which firms execute client orders and the selection of venues for the order execution policy;
- The investment firm’s procedures and criteria to monitor and regularly assess the effectiveness of its order execution arrangements and order execution policy;
- The investment firm’s execution of client orders through own account dealing; and
- How an investment firm should deal with specific client instructions.
Next steps: The EU Commission will have three months to assess the draft rules.
- Once adopted, they will undergo a three to six-month scrutiny period in the EU Council and EU Parliament before being published in the Official Journal of the European Union around October.
- Under current drafting, the rules would then apply 18 months after that, around April 2027.
South Korea fully reinstates short-selling
The Korea Financial Services Commission (FSC) has implemented all the reforms needed to resume short selling across all listed stocks while also preventing unfair trading.
In more detail: South Korea reactivated short selling across its stock markets on 31 March, with new penalties for naked short selling and a fully computerized detection system in place.
- The FSC stated that short sale reform measures have been put in place that will ensure fair price formation in the market.
- Under the new framework, institutional investors may resume short selling only if they have set up required computer systems intended to prevent naked short selling.
- Institutional and corporate investors can engage in short selling only if they have established relevant internal control standards.
- Securities companies can submit short sale orders only after verifying the establishment of required computer systems and internal control standards by institutional and corporate investors.
What’s next: Once the improved rules take effect on 31 March, a completely computerized short selling system will begin to operate on all listed stocks. Authorities will also strengthen monitoring over market activities and enhance market surveillance to ward off unfair trading activities.
FCA issues first fine against a recognised investment exchange
The UK Financial Conduct Authority (FCA) has fined the London Metal Exchange (LME) £9.2 million for failing to maintain adequate systems and controls during a period of extreme market stress in March 2022.
In more detail: In March 2022 nickel futures prices surged over $100,000 in just over an hour in the early hours of March 8, 2022, representing more than double the closing price on March 7, 2022.
- The LME suspended nickel trading for 8 days and cancelled all nickel trades that took place on March 8, 2022.
- The FCA found that the LME lacked sufficient policies for managing severe volatility, particularly around its automatic volatility controls (‘price bands’) and had inadequate processes for escalating major market issues to senior managers.
- During critical overnight trading hours, only junior staff were present and were unprepared to respond effectively to the unfolding crisis.
Broader impact: The FCA assesses that LME’s failure to act allowed prices to rise more rapidly than they should have, which increased risks to investors.
- While the FCA acknowledged improvements made since, this is the first time enforcement action has been taken against a UK-recognised investment exchange.
- The LME accepted the findings and received a 30% reduction in its fine.
SEBI consults on uniform expiry days for equity derivatives
To provide predictability and stability around the expiry of equity derivatives contracts, the Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing a uniform framework for determining the final settlement day across stock exchanges.
In summary: The proposal aims to reduce concentration risk, enable product innovation, and strengthen investor protection and market stability.
In more detail: As of January 2025, two major exchanges — Bombay Stock Exchange and National Stock Exchange – had adopted Tuesday and Thursday as their respective expiry days.
- However, one of the exchanges has proposed shifting expiry to Monday, raising concerns over frequent changes and their impact on orderly market functioning.
- The proposed framework seeks to formalize and harmonize expiry practices across exchanges.
Key elements:
- Uniform expiry day per exchange: Each exchange must adopt either Tuesday or Thursday as its sole expiry day for all equity derivatives. This avoids the first and last trading days of the week and ensures optimal spacing between expiries.
- Weekly benchmark index options: Each exchange may continue offering one weekly benchmark index options contract on its chosen expiry day (Tuesday or Thursday).
- Monthly expiry for other contracts: All other equity derivatives—including benchmark index futures, non-benchmark index derivatives, and single-stock futures and options—must have a minimum one-month tenor and expire in the last week of each month, on the exchange’s selected expiry day.
- Regulatory oversight for changes: Exchanges will be required to obtain SEBI’s prior approval before launching or modifying any contract expiry or settlement day.
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