FCA says London trading volumes may be three times higher than previously thought
Key Takeaways
- •The FCA estimates that London trading volumes could be up to three times higher than previously believed once dark trading through non-official channels is included.
- •Several major firms including Wise, Arm, and CRH have opted for US listings over London, intensifying efforts by UK policymakers to close the competitiveness gap with American exchanges.
- •London-listed companies received £44 billion in public takeover bids between March and June, with more firms receiving premium offers above 20 percent than in any other major market.
- •The FCA plans to enhance share trading transparency by 2028, though the LSE Group has warned that proposed consolidated tape rules could benefit certain investors unfairly.
- •Recent measures to strengthen London's appeal include a three-year stamp duty exemption for newly listed companies and an overhaul of FCA listing requirements to streamline the flotation process.
Trading volumes in London may be up to three times higher in value than previously believed once so-called "dark trading" is included, the Financial Conduct Authority has said.
According to analysis by the regulator, trading valuations are significantly higher because some market participants use non-official channels. The practice, known as "dark trading", involves private deals made through banks and other financial venues while using prices set on the London Stock Exchange. Dark pools, as these alternative venues are also known, have long been a feature of equity markets globally, allowing institutional investors to execute large orders without moving publicly quoted prices.
Executives at the LSE said in May that the proportion of trading taking place directly on exchanges was the lowest of any major global market.
The FCA now says there may be more liquidity, or cash moving around markets, than exchange data has suggested, meaning official figures have underestimated the real value of trading.
The research comes as the regulator seeks to ease concerns about the City's capital markets and discourage companies from moving to New York in search of better investment offers. Several firms, including Wise, the chip designer Arm, and the building materials group CRH, have opted for the US over London. The trend reflects a multi-year effort by UK policymakers to close the competitiveness gap with US exchanges, which typically offer deeper pools of capital and higher valuations for technology and growth companies.
The FCA hopes to improve transparency around share trading by 2028. However, the London Stock Exchange Group has argued that controversial plans for a "consolidated tape" could give an advantage to some investors who do not provide data.
Trading hopes boosted
Concerns about trading have weighed on investors for several years, but separate data has also lifted expectations around large takeover deals.
According to the Financial Times, more London-listed companies received public bids at premiums of 20 per cent or more above their share prices between March and June than any other major companies.
UK firms have received a total of £44bn in public bids, known as "bear hugs", in which companies are targeted at valuations above their existing share prices. Overseas buyers have moved in on listed groups including Segro and Beazley, while easyJet has been pursued by Castlelake and Apollo.
Efforts to support confidence in London markets and listed companies have also placed pressure on Chancellor John Healey to strengthen momentum, as the government appears to be giving less prominence to financial services.
Last year, Rachel Reeves announced that newly listed companies would receive a three-year exemption from the 0.5 per cent stamp duty on shares. That measure sits alongside the FCA's overhaul of UK listing rules, which streamlined requirements for companies seeking to float in London in a bid to attract fresh listings.