February 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.
- UK: Accelerated Settlement Taskforce Technical Group releases T+1 transition report
- USA: Additional firms charged in SEC off-channel communications sweep
- Saudi Arabia: Exchange launches fixed income market-making framework
- South Korea: FSC introduces WGBI Inclusion to Promote Global Investors’ Investment in KTBS
Accelerated Settlement Taskforce Technical Group releases T+1 transition report
The Accelerated Settlement Taskforce Technical Group has released a comprehensive report outlining the UK’s implementation plan for the transition to T+1 settlement, which is set to begin on October 11, 2027.
In more detail: The report includes several key recommendations and actions necessary for a successful transition:
- T+1 Code of Conduct (UK-TCC): Defines the scope, timetable, and expected behaviors for market participants to meet their T+1 obligations, including twelve critical actions across four business areas.
- Scope of Changes: Recommends amendments to the UK Central Securities Depositories Regulation (CSDR) to facilitate the transition to T+1, including setting the first day of UK cash securities trading for T+1 settlement on October 11, 2027.
- Settlement Processes: All allocation and confirmation processing must be completed electronically using recognized industry standards by the end of 2026, with settlement instruction submissions to the CSD completed by 5:59 AM UK time on T+1.
- Financial Market Infrastructures (FMIs): FMIs and their third-party providers must review and update their systems and processes to ensure there are no barriers to T+1, including the CREST modernization project.
- Static Data and Securities Financing Transactions (SFTs): Market participants must implement core principles and templates for sharing standard settlement instructions (SSIs) and automate stock lending recalls.
- Corporate Actions and Foreign Exchange (FX): Actions to improve corporate actions processing and reduce FX settlement risk, including reviewing and updating dividend processing and claims policies.
Main lesson: The report emphasizes the importance of automation, compliance, and timely action to ensure a successful transition to T+1. It highlights the need for collaboration among market participants, FMIs, and public authorities.
Significance: The report provides a detailed timeline for market participants, FMIs, and the AST to follow from 2025 to 2027, ensuring a seamless implementation of T+1 settlement.
Looking ahead: The UK Government welcomes the report and will set out its response shortly.
Additional firms charged in SEC off-channel communications sweep
The U.S. Securities and Exchange Commission (“SEC”) announced charges against nine investment advisers and three broker-dealers for failing to preserve electronic communications records. The firms acknowledged the violations and agreed to pay combined penalties of more than $63 million.
In more detail: Each of the SEC’s investigations found the use of unapproved (or “off-channel”) communication methods by staff at multiple levels of authority, which led to a failure to preserve records required to be maintained under federal securities laws. Each firm was also charged with failing to reasonably supervise their personnel with a view to preventing these violations.
Context: The charges are part of an expansive enforcement sweep of registrants’ communications and record keeping practices, from which the SEC has collected billions of dollars in penalties. It is unclear whether this enforcement sweep will continue under Acting Chairman Mark Uyeda.
Saudi Exchange launches fixed income market-making framework
The Saudi Exchange has introduced a Fixed Income Market Making Framework to enhance liquidity in the secondary market and improve price formation efficiency.
Summary: The framework is designed to stimulate activity in the secondary fixed-income market, following the successful introduction of market makers in equities and derivatives in 2023, and is aimed to enhance liquidity, increase transaction frequency, and attract both domestic and international investors. Under the Market Making Regulations, participants must be Saudi Exchange members and can act as principals or agents on behalf of clients.
Next steps: The Saudi Exchange will publicly disclose a list of market makers and the securities they cover on its website and will offer incentives to participants who meet their obligations.
Korean FSC introduces WGBI inclusion to promote global investment in KTBS
The Korean Financial Services Commission (FSC) introduced omnibus trading accounts and promotes the Global Operating Model to enhance foreign investors’ convenience and access to Korea Treasury Bonds (KTBs).
In summary: The FSC and relevant organizations have proposed revisions to the enforcement decree and supervisory rules of the Financial Investment Services and Capital Markets Act (FSCMA) to introduce a consolidated trading scheme for KTBs. This follows the government’s plan to revamp the KTB and Monetary Stabilization Bonds (MSBs) Investment Framework announced in December 2024 after Korea’s inclusion in the World Government Bond Index (WGBI).
What this means for foreign investors: Following the implementation of omnibus accounts for KTB settlements in June 2024, both domestic and foreign banks are preparing to adopt the global operating model to attract foreign investors to the KTB markets.
- The introduction of omnibus trading accounts will enable foreign financial investment business providers to consolidate their clients’ orders in KTB transactions, improving the efficiency of ordering and settling KTB transactions.
- Foreign investors will have the ability to place trading orders via omnibus trading accounts opened with securities firms and banks and settle the transactions through omnibus settlement accounts at Korea Securities Depository (KSD).
Expected regulatory changes: To facilitate the implementation of the model, the FSC and associated organizations plan to offer official interpretations and suggest regulatory amendments to address legal ambiguities.
- The FSC makes it clear through authoritative interpretation that foreign banks are allowed to sell KTBs that they do not own and then buy them later from domestic banks for the purpose of meeting the demand of foreign investors.
- The FSC plans to revise the enforcement decree of the FSCMA to allow foreign banks to buy KTBs from foreign investors and sell them to domestic banks before the settlement of the purchased KTBs.
- It is also made clear through authoritative interpretation that domestic banks, who act as dealers, are allowed to sell KTBs that they do not own and then buy them back later in the KTB market to meet foreign investor demand.
What’s next: The FSC plans to complete actions requiring authoritative interpretations and proceed with revisions to the Regulation on Financial Investment Business and the Enforcement Decree of the Capital Markets Act as soon as possible. The government will work closely with relevant organizations and the financial industry to support the advancement of capital markets and maximize the positive effects of Korea’s inclusion in the WGBI.
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