Markets View - July 2026

Regulators around the world continue to keep the ball moving on a range of market-related consultations, reports and enforcement activity. For this latest edition of Markets View, we've picked out some of the key developments that deserve a place in your starting XI:

• China's CSRC cracks down on illegal cross-border securities trading
• The EU Gas Market Task Force Staff Working Document
• The European Commission's report on commodity derivatives markets
• ESMA's Final Report on simplifying transaction reporting
• The EU's targeted suspension of the Derivatives Trading Obligation for UK venues
• FCA High Court proceedings against Neil Woodford and W4.0
• The new UK short selling regime (going live 13 July 2026)
• The CCP default management fire drill — key takeaways
• IOSCO's consultation on intraday liquidity dynamics

Foul play: China calls time on illegal cross-border securities trading

China's CSRC has announced its intention to confiscate all illegal gains — both domestically and abroad — of Tiger, Futu and Longridge, following prior investigations into illegal cross-border securities activities. Separately, the CSRC and seven other government ministries have announced measures to strengthen regulation of cross-border securities businesses, and the HK SFC has issued a circular to licensed firms flagging serious deficiencies in account-opening due diligence and imposing new requirements for onboarding Chinese mainland investors.

For firms providing cross-border services on a traditional, disciplined reverse-enquiry basis, or those primarily serving corporate and institutional clients, the immediate impact appears limited. The bigger picture, however, is a clear policy shift: mainland regulators are asserting jurisdiction over the cross-border activities of offshore institutions and are expected to make increasing use of inter-departmental and PRC–HK regulatory co-ordination to identify and pursue illegal activity.

Private banks and others targeting mainland individual investors should expect closer scrutiny of their onboarding and marketing practices. We are aware that firms are beginning to re-evaluate their business models in light of these developments. Please do get in touch if you would like to discuss what this means for you.

Changing formation: The EU Gas Market Task Force reports in

On 01 June 2026, the European Commission published a major Gas Market Task Force (GMTF) Staff Working Document. The report maps out how European gas markets have been structurally rewired since 2022 and offers 14 findings with practical implications for firms trading gas and using associated infrastructure.

A market transformed. The first part of the report is a great primer on how the European gas landscape has shifted in recent years. A few key findings help tell the story:

• Import dependency hasn’t shifted much: the EU still sources around 88% of its gas from abroad.
• Russia is out, LNG is in: Russian pipeline supply has collapsed from 42% in 2021 to just 12% by Q3 2025. LNG has filled most of the gap and now accounts for around 40% of EU supply. The US is now the EU's largest LNG supplier (and second-largest overall supplier after Norway).
• Flows have flipped: the old east-to-west corridors that carried Russian gas into central and western Europe are increasingly supplanted by west-to-east and south-to-north flows.
• TTF is king: Dutch TTF has cemented its status as Europe's key gas benchmark, and we’re aware it will by now be familiar to many readers. Traded volumes are projected to have approximately doubled between 2022 and 2025.
• Prices look sticky: The EU had hoped that a wave of new LNG supply and regasification capacity would ease prices – but that was before the 2026 Gulf crisis. The report suggests that prices are set to remain structurally high and very volatile for the foreseeable.
• Gas meets power: as renewables have expanded, gas is becoming less influential in marginal electricity price formation — particularly outside peak hours — and short-term electricity-gas price correlations are declining. Gas storage, though, remains a "crucial backstop" for energy security across both sectors.

Key regulatory takeaways. The 14 GMTF findings have a number of practical implications for firms in this space. There are a few we wanted to put in the spotlight:

• REMIT II (Finding 4, among others). The report is another reminder that timely compliance with the expanded obligations – particularly the new reporting obligations in the REMIT Implementing Regulation (EU 2026/256) – is non-negotiable. We looked at this in our May edition — get in touch if you'd like a recap.
• OTC positions and position management (Finding 8). Trading venues may in future be granted powers to request, on an ad hoc basis, information on a broader set of OTC positions capable of influencing on-venue pricing or settlement. The current regime, which captures only "economically equivalent" OTC contracts, is flagged as inadequate. For context: the UK's revised commodity derivatives framework already moves in this direction, with trading venues given powers to obtain OTC position data as part of their regulatory toolkit.
• Position limits (Finding 10). The key TTF and THE gas contracts are both subject to MiFID II position limits. Traders should have robust position-monitoring processes in place and ensure appropriate hedging or liquidity provision exemptions are held where needed. On the latter, the GTMF recommends making the exemption process more agile, potentially by transferring it from national authorities to trading venues, as has already happened in the UK.
• Gas storage and derivatives (Finding 12). The GMTF finds that poorly-coordinated implementation of storage-filling obligations has been distorting derivatives market dynamics and recommends that Member States factor those market impacts into the design of national storage policies.

Cautious defending: Commission reports on commodity derivatives markets

One 26 May 2026, the European Commission posted its long-awaited report on commodity derivatives markets. In many ways it is a ‘sister’ document to the above-mentioned GMTF working document as they both draw on the same February 2025 targeted consultation, and so reach similar conclusions in overlapping areas. For the report, three areas are in focus: data reporting, the ancillary activity exemption, and position limits and reporting. Overall, it strikes a cautious tone, calling for a stocktake rather than sweeping changes.

Data reporting. Commodity derivatives trading is subject to an unwieldy patchwork of MiFID II, MiFIR, EMIR and REMIT reporting rules. Most respondents want that streamlined, with double-reporting removed. The Commission is open to better data-sharing between authorities and common unique identifiers across financial and energy regimes – but ultimately concludes the existing framework is sufficient and stops short of concrete proposals.

Ancillary Activity Exemption (AAE). The AAE allows certain non financial firms to trade commodity derivatives without MiFID2 authorisation, provided trading is genuinely ancillary to their main business. Most respondents urge against reopening the regime, and the Commission agrees there is no pressing need for reform. One idea it does pick up is a simple, one off notification to regulatory authorities when firms enter or exit commodity derivatives markets.

Position limits and reporting. Broadly, respondents consider that the current regime – where regulatory authorities (not trading venues) set position limits –works. As noted in the GMTF document, the Commission sees some scope for trading venues to take on more responsibility for hedging and liquidity provision exemptions; but it stops short of suggesting venues should set limits themselves.

On OTC positions, the Commission has already proposed (via the Market Integration and Supervision Package) that EU investment firms' positions in “economically equivalent OTC contracts” outside EU venues should count for MiFID position limit purposes. Again, as noted above, the Commission recommends exploring powers for trading venues to request (on an ad hoc basis and in certain circumstances) information on a broader set of OTC positions capable of influencing on-venue contracts.

The bottom line
This report won't be remembered as a turning point – the Commission has chosen consolidation over reform. But the direction of travel matters: on OTC positions, position reporting and data, the EU and UK regimes are quietly diverging. Do get in touch if you would like to discuss how you may be affected.

Half time talk – ESMA reports on simplifying transaction reporting

ESMA has published its Final Report on the Call for Evidence on a comprehensive approach for the simplification of financial transaction reporting (i.e. MiFIR, EMIR and SFTR reporting) – for a precis, check out the press release. This follows the interim report published in May 2026.

We’ll be reviewing this in detail, but the headline is that, for the long-term approach, ESMA is recommending a single integrated transaction reporting framework across the regimes, based on a ‘report once’ principle. We can therefore expect some big changes coming our way in the reporting space over the next couple of years.

In the shorter term, ESMA is also recommending intermediate measures including expanding the use of delegated reporting arrangements, streamlining intragroup exemption procedures, and targeted adjustments at ESMA level to reduce low-value or duplicative reporting requirements.

A late reprieve: targeted suspension of the DTO for UK venues

On 15 June 2026, the European Commission published Commission Implementing Regulation (EU) 2026/1288 (Implementing Regulation) on the standalone suspension of the Derivatives Trading Obligation (DTO) under MiFIR.

By way of reminder, the DTO requires FCs and NFC+s to execute certain in scope derivative contracts only on specified trading venues. Following Brexit, UK trading venues were not granted equivalence recognition. As a result, EU authorised financial counterparties have been unable to execute transactions in DTO covered derivatives on UK venues.

The implementing regulation, which took effect on 18 June and will be reviewed every 5 years, suspends the DTO for a small group of major EU banks when dealing on UK trading venues – specifically for:

• BNP Paribas SA, Crédit Agricole CIB, Deutsche Bank AG and Société Générale SA in respect of all in-scope derivatives.
• BNP Paribas SA in respect of credit default swaps.

The suspension is narrowly targeted at key EU banks acting as market makers for non-EEA counterparties who have no active membership on an EEA venue. The absence of MiFIR equivalence post-Brexit prevented them from accessing UK venues, despite continued client demand and the fact that those venues remained among the primary liquidity pools.

In the penalty box – FCA launches proceedings over Woodford’s new online service

The FCA has issued High Court proceedings against Neil Woodford and his new online service, W4.0, alleging they are providing investment advice and making financial promotions without authorisation, in breach of FSMA. The regulator is also seeking an injunction to stop these “potentially unlawful activities”.

Launched about a year ago, W4.0 offers customers access to Woodford’s investment strategies, marketed at investors who then implement ideas through their own broker or platform. The service, operated by a UAE registered entity, prominently states that it is not FCA regulated and does not provide financial advice – a position now squarely in the FCA’s sights.

This latest clash follows the FCA’s provisional £46m fine and ban against Woodford and his firm (since referred to the Upper Tribunal) in relation to his defunct Equity Income fund, for liquidity risk failings linked to the fund’s 2019 collapse. The W4.0 action will be an interesting one to watch, as a test of how far online “strategy access” and model style content can go before crossing the line into regulated advice.

New UK Rules on shorts

Regular readers will know we’ve been tracking progress regarding the UK’s new short selling regime, which is due to go live imminently on 13 July 2026. The key changes are captured in our “Top 10 things to know” Insights article. As a reminder, some of the key points are:

• The FCA will start publishing anonymised aggregate net short positions (ANSPs), instead of naming individual position holders once they hit the current 0.5% public disclosure threshold.
• The FCA will publish Reportable Shares Lists, setting out which shares are in scope for UK position reporting and cover requirements. This should remove the need for firms to cross-check FIRDS against the exempt shares list.
• The reporting deadline will be pushed back from 3:30pm to 11:59pm on T+1, giving firms more time to get reports in.
• UK sovereign debt and related CDS will drop out of the regime, although the FCA will still have emergency powers to act on short selling in those instruments if needed.

If you have any questions about the new regime, please don’t hesitate to get in touch.

Injury time for clearers – Thoughts on CCP default management fire drill

Calling all clearing members (and their clients…): how confident are you that your CCP could cope if a major clearing member defaulted? And, just as importantly, do you know what would happen to your trades if things suddenly went sideways?

In November 2025, CCP Global, an industry body, ran a global simultaneous default management exercise. Key regulators (including the Bank of England, BaFin, the CFTC and ESMA) have now published a summary of industry feedback.

The good news? Overall, the drill suggested that CCPs and market participants can successfully run default management processes when called upon. The slightly less comforting news is that some firms found it hard to juggle everything at once. Competing priorities and resource constraints were the main pinch points, with some members de-prioritising porting and non-mandatory auctions where those activities clashed with must-do obligations. Finding experienced traders seconded by clearing members to support CCP hedging activity across multiple exercises was another pressure point.

A familiar theme also came through loud and clear: the industry would like more harmonisation. Participants pointed to the benefits of greater consistency in file formats and conventions — potentially through a universally agreed format sitting alongside each CCP’s own proprietary set-up. Web-based forms got a warmer reception than email, which is perhaps not surprising in a live default scenario.

Client porting was another tricky area. In practice, it was reportedly difficult to complete within the short timeframes available, with AML/KYC proving to be the key blocker, particularly where clients had not lined up a back-up clearing member in advance. There was also a call for more consolidated porting information. Safe to say, porting is not something you want to be figuring out for the first time in the middle of a default.

Of course, the summary only looks at how well the processes worked – if you really want to get under the bonnet of what those processes are and the obligations and risk exposures they place on you (including in a default scenario), then you need to delve deep into the rules that CCPs themselves put in place. Fortunately, this is one of our favourite pastimes – we cover a number of CCPs within our Trading Venue Reviewer product, using a detailed questionnaire specially crafted for the task. Please do get in touch if you’d like a demo.

Kick-off for IOSCO consultation on intraday liquidity

Back in May, IOSCO published a consultation report on the evolution of intraday liquidity, asking whether market oversight is keeping pace with a fundamental shift in how and when equity markets find their price.

The report focuses on the growing concentration of trading activity at the close, and whether current regulatory and supervisory approaches remain fit for purpose. Closing auctions are increasingly the key moment for price formation and execution, and IOSCO wants venues and regulators to be ready for the risks that come with that. Its recommended “good practices” include:

• assessment of intraday liquidity dynamics;
• ensuring operational risk and resilience across varying liquidity conditions;
• adopting risk-based market surveillance frameworks to monitor market manipulation;
• implementing appropriate volatility control mechanisms; and
• regulatory and supervisory approaches on assessing how trading venues monitor and, where appropriate, respond to any risks arising from changing intraday liquidity dynamics.

IOSCO is not prescribing solutions, but the consultation signals growing regulatory attention on market risks. Concentrated liquidity may heighten operational and market integrity concerns if not properly managed.

Key takeaway. Trading venues and market participants should take note that intraday liquidity is attracting increasing regulatory attention. It’s worth considering whether surveillance, controls and operational arrangements remain appropriate as liquidity patterns evolve – particularly during periods of concentrated trading activity.

The consultation closes on 21 August 2026. Do get in touch if you’d like to discuss the proposals and what they may mean for your business.

That’s all from us for the summer – look out for our next edition in September! Happy holidays everyone.