Speaker 1: We're going to turn back to the UK now. The
Speaker 1: Chancellor at Rachel Reeves has canceled a plan speech to
Speaker 1: the London Stock Exchange this morning. She's due to attend
Speaker 1: an address from Downing Street from the Prime Minister instead,
Speaker 1: but she was due to mark the introduction of new
Speaker 1: rules for raising capital on London's markets aimed at making
Speaker 1: them more competitive. It's been dubbed a new golden age
Speaker 1: for the city. Joining us now to discuss Simon Wall,
Speaker 1: who's the executive director from Markets to the Financial Conduct Authority. Simon,
Speaker 1: good morning, Good to see you in studio today. Talk
Speaker 1: us through then the changes coming into force from today.
Speaker 1: This is about cutting red tape.
Speaker 2: Yeah that's right. I've just hot fitted it over from
Speaker 2: the Stock Exchange this morning where they had that big launch.
Speaker 2: These reforms are called Poatra, which is not the snappiest,
Speaker 2: but there's real substance behind it. There's two things i'd highlight.
Speaker 2: One change is to prospectuses. So when companies who are
Speaker 2: already listed raise new capital on the Stock Exchange, they
Speaker 2: used to have to issue a new prospectus at twenty percent.
Speaker 2: We've raised that all the way to seventy five percent,
Speaker 2: making it cheaper, easier and quicker to raise new capital.
Speaker 2: And then the event this morning was all about the
Speaker 2: debt side. We used to have a restriction where if
Speaker 2: a company issued debt in denominations of below one hundred
Speaker 2: thousand there was additional red tape. There are additional forms
Speaker 2: to fill in. We look to that. The people who
Speaker 2: were supposed to read it weren't and it was really
Speaker 2: restricting participation for retail. So we've stripped it away. We've
Speaker 2: made it just the same over one hundred thousand to below.
Speaker 2: We're actually really enthusiastic the people retail in the UK
Speaker 2: may start investing in bonds from as little as a pound.
Speaker 2: So there was real energy in the room today, notwithstanding
Speaker 2: that the Chancellor couldn't make it really good speeches and
Speaker 2: the whole of London's fixing come market out to support
Speaker 2: the new rules.
Speaker 3: So yeah, so changes on perspectives, changes on the debt side,
Speaker 3: as you just mentioned as well. What other areas you're
Speaker 3: looking at is is there still still more to come in,
Speaker 3: more that you can do.
Speaker 2: Yeah, Suddenly, I'd say we're halfway through a program of
Speaker 2: really ambitious reform to UK capital markets. I'd say that
Speaker 2: each part is different, but the real hallmark is looking
Speaker 2: at those areas where we have preemptive checks often but
Speaker 2: not only inherited from the EU and replacing them with disclosures.
Speaker 2: That's always when it's right and when there's enough information
Speaker 2: out there for the market. Our preference is to remove
Speaker 2: a gate, whether it be a check from the regulator
Speaker 2: in some cases for shareholders and replace it with disclosures
Speaker 2: and show a bit of faith in the price formation process.
Speaker 1: What is the metric that you're judging the success of
Speaker 1: these changes? Are the number of IPOs in London.
Speaker 2: There's a lot of things. Man, I should stress that
Speaker 2: we're doing this across all of the UK, different asset classes,
Speaker 2: so it's not only focused on equities. Obviously, today's reform perspectives,
Speaker 2: it's a major element in equities. We've set out our
Speaker 2: own north Star metrics as the FCA alongside our strategy.
Speaker 2: Those are big things. We've got UK exports, we've got
Speaker 2: the contribution that financial services makes to the overall GDP
Speaker 2: of the country, but obviously there's a lots of other
Speaker 2: factors that go into that. For these particular reforms, yeah,
Speaker 2: we'll look at the speed with which companies can raise money.
Speaker 2: We will look at in time IPOs whether this makes
Speaker 2: it even more attractive to list and raise in the UK.
Speaker 2: The early signs are good, but of course, as implied
Speaker 2: in your question, there are loads of other factors that
Speaker 2: go into that. We just want to make sure the
Speaker 2: regulation is an asset to the UK rather than attraction.
Speaker 3: Yeah, I mean, I guess to inject to notice skeptism here.
Speaker 3: I mean, you know all very well talking about UK
Speaker 3: markets hitting record highs, as you know, I think the
Speaker 3: Chancellor probably would have would have done, and you know,
Speaker 3: talking about a new golden age former chance to talking
Speaker 3: about a big bang two point eight. But can you
Speaker 3: understand why there, you know, where there can be a
Speaker 3: degree of skeptism form people in the city who hear
Speaker 3: politicians talking big but maybe don't necessarily feel that they've
Speaker 3: delivered all that much.
Speaker 2: I mean, you've quoted things there from the chances of speech.
Speaker 2: It's not not my place to comment on. All I
Speaker 2: would say is that the program of reform taken together,
Speaker 2: each individual thing contributes to both the whatever it does,
Speaker 2: but also the spirit in the city. I would say
Speaker 2: the energy in the city is good. At the moment.
Speaker 2: We are the second largest market in the world unambiguously
Speaker 2: with the world leader in drivetied markets community markets EFFS.
Speaker 2: So there's of strength. But it's a competitive world out there.
Speaker 2: We're competing with all sorts of established and competitive markets.
Speaker 2: So we need to keep this challenge of mindset. But
Speaker 2: I'd say the mood is good, but you're right to
Speaker 2: have some caution. There's a lot of things we need
Speaker 2: to be on this road for a long time.
Speaker 1: The FCA is talked about the dialing up risk, meaning
Speaker 1: that more things will go wrong. What kind of things
Speaker 1: are you preparing for and when does the risk cross
Speaker 1: a red line for you when you're thinking about changes
Speaker 1: to regulation.
Speaker 2: Yeah, it's a good question, difficult in the abstract. I mean,
Speaker 2: the first thing I would say is everybody in the
Speaker 2: city and wider into politicians are talking about a move
Speaker 2: away from risk, aversion this sense that we need to
Speaker 2: optimize risk rather than just reduce it. But the proof
Speaker 2: of the pudding is in the eating. Much gets much
Speaker 2: harder when you talk about specific risks and making sure
Speaker 2: that the societal appetite is there. One of the things
Speaker 2: that we're really keen to support is more retail participation
Speaker 2: in capital markets probably defined lots of initiatives the ones
Speaker 2: I mentioned today, but also targeted support a way of
Speaker 2: bridging the gap between full fat financial advice and what
Speaker 2: people use at the moment. But the more retail invest
Speaker 2: in capital markets, we have to accept that sometimes you
Speaker 2: lose money. This is about the medium term, the long term,
Speaker 2: rather than the short term. And I'm not sure that
Speaker 2: the societal appetite is yet established. I think we've made
Speaker 2: great strides, but we need to be on this path
Speaker 2: for three, four or five years for people to say, Okay,
Speaker 2: the UK has really got it, and i'd apply that.
Speaker 2: Of course, a whole range of the reforms we're doing.
Speaker 2: Each of them have downside. These aren't always low hanging fruit,
Speaker 2: but we try and get that out clear and try
Speaker 2: and get it into society so that when the downsides happen,
Speaker 2: we can hold our nerve and keep going forward.
Speaker 3: Yeah, I mean, maybe one specific risk we could talk
Speaker 3: about then, given that greater appetite for risk, and also,
Speaker 3: as you said, the desire to see more retail participation.
Speaker 3: Obviously huge theme in markets and in finance at the
Speaker 3: moment is the explosion in private markets that we're seeing
Speaker 3: Wall Street, you know, hugely excited about the opportunity of
Speaker 3: selling some of these alternatives to the wealthy and also,
Speaker 3: you know, to retail investors. Does that kind of you know,
Speaker 3: full fat approach to risk in retail participation? Does that
Speaker 3: fully apply when it comes to private markets? And you know,
Speaker 3: Granny is investing in Pee and all sorts, so you.
Speaker 2: Give me an opportunity. There are actually three things went
Speaker 2: out today. I didn't think i'd get the third run across.
Speaker 2: But there's a public offer platform where we're saying, if
Speaker 2: you're a private company you want to raise more than
Speaker 2: five million pounds as a one off, here's a structure,
Speaker 2: and actually that structure seeks to adress the point you're raising,
Speaker 2: which is putting a little bit more due diligence in
Speaker 2: to protect retail in those investments. We have pisces coming
Speaker 2: down the track, and new type of trading venue again
Speaker 2: for private companies, a sort of bridge between the private
Speaker 2: markets and the public markets. Your bought a question. There
Speaker 2: are no easy answers on these things. I think private
Speaker 2: markets as an asset class, so it's been booming and
Speaker 2: many good returns available, but the absolute heart of it
Speaker 2: is a is reduced liquidity that's almost the thing about
Speaker 2: private marketing, as they're not public and the valuations are
Speaker 2: less frequent and in many ways harder. So I'm not
Speaker 2: averse in any means by measures to get that into
Speaker 2: retail portfolios, but there is no you can't pretend that
Speaker 2: it's liquid, So I'm skeptical about people use the term democratization.
Speaker 2: It does raise my eyebrows sometimes because private markets need
Speaker 2: to retain the features of private markets. So I think yes,
Speaker 2: in safe ways, including the long term asset funds, the
Speaker 2: perfectly reasonable part of people's portfolios, but we just need
Speaker 2: to make sure that it's done in a responsible way.
Speaker 1: Okay, Simon, great to have you with us. Thanks very
Speaker 1: much for joining us on the program this morning.