Author: Sybille Mueller, Director
Regulation continues to be a driver for change across the industry, with many regulations coming into force in 2025. At the same time, longer-term developments such as T+1 or the consolidated tape are progressing, with implementation timelines reaching into 2027 in some cases, and regulations such as the AI Act are yet to be adapted specifically for financial markets.
We’re also witnessing a swathe of political changes worldwide, but most significantly the election of the Labour government in the UK and the Trump administration in the US, signalling major shifts in areas that will heavily impact financial market players, from large institutions to FinTech and crypto. In addition, we are starting to see the UK divergence from EU regulations as a result of Brexit, placing additional compliance burdens on firms operating across multiple jurisdictions.
We dive into some of these developments with a keen eye on our client universe to understand the developments that will impact our industry. We exclude ESG here, as we will focus on this area in our next month’s blog in a lot more detail
2024 saw the establishment of a new government in the UK, and with it, a new focus for regulators from the Chancellor of the Exchequer, Rachel Reeves. The development of an overarching ‘Financial Services Growth and Competitiveness Strategy’ will include FinTech as one of five priority sectors, alongside sustainable finance, asset management and wholesale services, insurance and reinsurance, and capital markets. The strategy is expected to be published in Spring 2025.
A core tenet of this strategy is to simplify and modernise the UK’s public markets and attract more companies to list in London, with the aim of competing with financial hubs like New York and Hong Kong.
To this end, the Chancellor committed to establishing the Private Intermittent Securities and Capital Exchange (PISCES), to allow firms to access funding from institutions and sophisticated investors without the regulatory burdens and costs associated with traditional IPOs. The aim of PISCES is not to replace London’s AIM market, but to bring some of the trading infrastructure used in public markets to private companies through PISCES, and to promote growth and support innovation in the UK economy.
The FCA is currently consulting on PISCES and will make the regulatory framework public after the Treasury has laid its final statutory instrument before Parliament, which is expected by May 2025.
It is worth noting that a new Europe-wide Listings Act entered into force in December 2024, which will significantly impact companies looking to IPO on European markets by making the process more attractive and less burdensome. These new rules are set to enter into full application by July 2026.
The US is heading into an era of deregulation as Trump plans to roll back nearly 80 regulations implemented during the Biden administration, some of which he views as overly burdensome for the financial sector. Key areas of interest include relaxing rules on FinTech partnerships, bank mergers, and oversight of bank charters. He expressed strong support for cryptocurrencies, including launching initiatives to position the U.S. as a global leader in digital assets.
In the first few days of his presidency, Trump administration Trump rolled back on major ESG initiatives, withdrawing from the Paris Climate Accord (favouring traditional energy sectors like oil, gas, and coal over renewable initiatives); ended the Green New Deal (aimed at boosting green jobs, regulating the fossil fuel industry and limiting pollution); and ended all DE&I initiatives within the federal government.
In line with his broader economic strategy, Trump is likely to adopt a protectionist trade stance, impacting international financial services and supply chains. This could lead to regulatory adjustments to favour domestic players.
In Europe, The EU’s Markets in Crypto-Assets (MiCA) regulation became fully effective on December 30, 2024. It established a unified framework for the issuance, custody, and trading of digital assets, focusing on transparency, consumer protection, and market integrity. MiCA differentiates between asset-referenced tokens, e-money tokens, and other crypto-assets, providing clear guidelines for issuers and service providers. It also aims to prevent market abuse and align member states under a single regulatory structure.
Meanwhile, the UK government has outlined its Crypto Roadmap, with consultation periods through 2025 and the expectation of finalised rules by 2026. This slower timeline reflects efforts to refine a system suited to the UK’s market structure while remaining distinct from MiCA.
Particularly noteworthy in the UK is the Digital Securities Sandbox (DSS), a joint Bank of England/FCA initiative, designed to facilitate the issuance, trading and settlement of digital securities, ensuring that any developments do not inhibit innovation and protect financial stability.
In the US, Trump intends to make the US the world capital of artificial intelligence and crypto. He signed a pro-crypto executive order and vowed to create a new group on digital assets. The executive order demanded a major overhaul of crypto policy, including a study that would evaluate the creation of a “national digital asset stockpile.
The Digital Operational Resilience Act (DORA) took effect in January 2025 and applies to tens of thousands of EU financial institutions and global IT service providers which service EU businesses. It aims to strengthen the cybersecurity and IT resilience of financial institutions and help maintain market stability by improving firms’ ability to withstand and recover from operational disruptions.
The UK is not directly adopting DORA but aligns closely through its own operational resilience framework (PS21/3) governed by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). This framework was introduced in 2022 and will be fully effective by the end of March 2025. While similar in purpose, they have unique features, such as tailored resilience planning and testing focused on UK-specific financial markets. The UK’s framework requires dual compliance for firms operating in both the UK and Europe.
The UK regulators (HM Treasury, the FCA and PRA) are considering changes to the Senior Managers and Certification Regime (SM&CR) as part of the broader Edinburgh Reforms aimed at enhancing UK financial services competitiveness. The envisaged changes will reduce regulatory burdens while enhancing accountability, striking a balance between robust oversight and reducing unnecessary compliance costs while protecting market integrity. Formal decisions are expected in 2025.
While both the UK and EU frameworks share the goal of enhancing governance and accountability in financial services, the UK’s SM&CR distinctly prioritizes individual accountability, making individuals personally accountable for failures within their remit. In contrast, the EU remains focused on a collective and harmonised framework, enhancing corporate governance structures at the group level rather than granular individual accountability.
The move from a T+2 to a T+1 settlement cycle was implemented in the United States, Canada and Mexico in May 2024 and designed to reduce systemic risks, improve operational efficiencies, and better protect investors by shortening the time between trade execution and final settlement.
In November 2024, European Securities and Markets Authority (ESMA) proposed 11 October 2027 as the target date for implementing the T+1 settlement cycle for securities in the EU. In January 2025 ESMA, the European Commission (EC), and the European Central Bank (ECB) established a new governance framework to facilitate the EU’s transition to a T+1 settlement cycle. This framework is designed to oversee and coordinate the operational, regulatory, and technological aspects of the shift.
In late January 2025 the Swiss Securities Post-Trade Council (Swiss SPTC) and the UK’s Accelerated Settlement Taskforce (AST) have both recommended alignment with the October 2027 target date, reflecting a consensus among the EU, Switzerland, and the UK.
In 2023, the European Council and Parliament reached an agreement to implement a real-time Consolidated Tape (CT) for equities and fixed income, to support market transparency, improve price discovery, reduce the costs of accessing market data and support regulatory compliance. Tender and selection processes are in motion, with differing implementation expectations.
On the equities side:
On the fixed income side:
On the derivatives front:
The EU AI Act was published in July 2024, establishing obligations for providers, deployers, importers, distributors, and product manufacturers of AI systems, with a link to the EU market.
The AI Act is a horizontal piece of legislation – a technology-focused regulation that covers AI`s many impacts and use cases. As such, little attention has been given to AI tools deployed in the financial sector. This could be left for a later stage when the legislator would create bespoke regimes for specific cases by means of secondary rulemaking (i.e. implementing acts). At that stage, it is expected that the regulation will impact algorithmic trading and risk management systems.
However, increased discussion about the use of AI will fuel scrutiny of the use of the technology in financial markets because a key characteristic of AI systems is their capability to infer. This capability refers to: A – the process of obtaining the outputs, such as predictions, content, recommendations, or decisions, which can influence physical and virtual environments; and B – to a capability of AI systems to derive models or algorithms, or both, from inputs or data. The capacity of an AI system to infer transcends basic data processing by enabling learning, reasoning or modelling.
Most of the provisions of the AI Act will be fully applicable from 2 August 2026. However, those AI systems that pose unacceptable risk (affecting health and human rights) will be banned from 2 February 2025. Rules on general purpose AI models such as ChatGPT, and governance at the EU level, will also apply from 2 August 2025.
The UK government approach contrasts with the more prescriptive EU regulatory methods. The UK unveiled this framework in 2024, positioning itself as a pro-innovation hub while maintaining key safeguards. It does not propose the creation of a new AI-specific regulator but instead relies on existing regulatory bodies like the Financial Conduct Authority (FCA), the Information Commissioner’s Office (ICO), and Ofcom to adapt their practices to the new AI framework.
On a global scale, the conclusions of the United Nations’ High-Level Advisory Body on Artificial Intelligence were published in September 2024 in their report titled Governing AI for Humanity. This report outlines a framework for global AI governance, addressing key issues such as equity, regulatory standards, and the safe advancement of AI technologies.
The Markets in Financial Instruments Regulation (MiFIR) review, part of the broader MiFID II reforms, was ongoing last year, with implementation deadlines set for September 2025. This review seeks to enhance transparency, market resilience, and competitiveness across EU financial markets, focusing on areas such as trading, reporting, and market integrity.
The amendments aim to increase both pre-trade and post-trade transparency. This includes more detailed disclosure requirements for trading venues and investment firms to ensure that market participants have access to accurate and timely information.
Notable areas of change include:
The Labour Government’s National Payments Vision has now set a vision of a “trusted, world-leading payment ecosystem”, tasking regulators to draw up proposals by Q2 2025 on necessary upgrades to payments infrastructure – specifically the Faster Payments System (FPS); identifying longer term infrastructure needs; and what governance and funding is needed (including reform of Pay.UK). The government is also moving ahead with designing a Central Bank Digital Currency and testing it, to enable a decision on whether to proceed – which would require an Act of Parliament, in due course.
The Payment Services Directive 3 (PSD3) and Payment Services Regulation (PSR) were both proposed in 2023, with the aim of modernising payment frameworks to enhance consumer protection, facilitate Open Banking, and improve fraud prevention. Legislative reviews are ongoing; rules and guidance came into force on 31 March 2022, and the transition period officially ends on 31 March 2025.
The Instant Payments Regulation (ISP) (EU 2024/886) was adopted in March 2024 and entered into force in April 2024 with European banks and payments services providers (PSPs) having to comply with the first set of obligations – to receive instant payments – by 9 January 2025. The big deadline and the game changing moment for European payments, however, will come in 10 months, on October 9, when banks need to be able to send instant payments.
In terms of global developments, Swift’s ISO 20022 becomes the sole standard for all cross-border payment instructions in November 2025, following two years of coexistence with the MT standard to allow migration.
Introduced in response to the financial crisis of 2008, Basel III is a comprehensive set of international banking regulations developed by the Basel Committee on Banking Supervision (BCBS), which aims to strengthen the regulation, supervision, and risk management of banks worldwide.
The United Kingdom has revised its timeline for implementing the final components of the Basel III banking reforms, known as Basel 3.1. Initially scheduled for January 1, 2026, the implementation date has been postponed by one year to January 1, 2027. This decision was announced by the Prudential Regulation Authority (PRA) in January 2025, following consultations with HM Treasury. The delay aims to align the UK’s regulatory framework with international developments, particularly in the light of a new administration in the United States, and to consider factors related to competitiveness and economic growth.
In the EU, the majority of Basel III reforms are scheduled to take effect in January 2025. The implementation of the Fundamental Review of the Trading Book (FRTB) standards, which pertain to market risk capital requirements, has been postponed to January 2026. This delay aims to maintain a level playing field internationally and to provide banks with additional time to adjust to the new requirements.
