City trading ‘higher than thought’, FCA believes
Trading volumes in London are up to three times higher in value than thought after so-called “dark trading” is taken into account, the City regulator believes.
Analysis by the Financial Conduct Authority believes that trading valuations are much higher as some traders opt to use non-official channels.
This kind of business, referred to as “dark trading”, accounts for where private deals are made via banks and other financial forums while using prices set on the London Stock Exchange.
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 has now suggested that there is more liquidity, or cash flowing around markets, than previously thought as data on exchanges was underestimating the real value of trading.
New research has aimed to ease concerns about the City’s capital market struggles and prevent companies from moving to New York in their search for better investment offers. Several firms including Wise, the chip designer Arm, and the building materials group CRH have shunned London for the US.
The City regulator hopes to provide further transparency on share trading by 2028 though controversial plans under “consolidated tape” could put some investors who avoid providing data at an advantage, it has been claimed by the London Stock Exchange Group.
Trading hopes boosted
Concerns over trading have dogged investors over several years yet separate data has also boosted morale over the potential for large takeover deals.
According to the Financial Times, more London-listed companies have received public bids at a premium of 20 per cent or more above their share price between March and June than across any other major companies.
UK firms received a total of £44bn in public bids known as “bear hugs” where companies swell for higher valuations, with overseas buyers snapping up listed groups such as Segro and Beazley, while easyJet has been pursued by Castlelake and Apollo.
Efforts to boost confidence in London markets and listed firms put some pressure on Chancellor John Healey to boost momentum, with a focus on financial services appearing to fall down the list of priorities for the government.
Last year, Rachel Reeves announced that newly-listed companies would receive a three-year holiday on the 0.5 per cent stamp duty on shares.