SIB urges key change to trading system

The Securities and Investments Board, the senior City regulator, is urging the Stock Exchange to rethink a key element of its new electronic trading system so that traders can qualify for tax relief.

In a move that is bound to anger member firms, the SIB wants the new breed of registered principal traders - who are to replace market-makers - to be given a wider role in supporting the dealings of the market as a whole.

But the Stock Exchange, backed by member firms, is strongly resisting a change to its plans.

Kenneth Clarke, the Chancellor, made clear last month that he would have to be satisfied on this public interest aspect of the reforms before he gave away taxpayers' money to the Exchange's members in the form of continued stamp duty relief on share transactions. At stake is hundreds of millions of pounds of relief each year.

SIB officials believe that the plans announced by the Stock Exchange last month may not meet the main criterion for relief, which is that the firms that receive it are benefiting the liquidity of the market as a whole.

The Chancellor has asked the SIB, chaired by Sir Andrew Large, to make recommendations early next month on how the restructured stock market can qualify for tax relief.

But at the Stock Exchange the new plan represents a compromise after three years' argument among member firms and there is reluctance to alter it.

The disagreement between the SIB and the Exchange about the registered traders centres on the key issue of whether the traders deal on or off the main market.

The registered traders would swing into action whenever the new electronic order book system of trading - on which buyers and sellers are automatically matched - cannot cope, because orders are too large. They are an essential mechanism for keeping the market going.

Under the Exchange's proposals, the traders would deal bilaterally on large blocks of shares by telephone with their own customers or with other Stock Exchange member firms.

The Exchange's big members are said to prefer this because it is more cost-effective to devote capital to trading with their own approved customers rather than any investor who calls up to buy or sell. However, the SIB is trying to steer the Exchange away from this off-market telephone trading of large orders. It is looking for a system in which the registered traders are more closely linked to the main electronic order book, giving greater liquidity and openness to the market as a whole.

This set-up would make it easier to recommend giving stamp duty relief on the Chancellor's terms. SIB officials believe this method, used by the Tradepoint dealing system, may not be transferable to the Stock Exchange, but weeks away from the deadline for recommendations they are continuing to search for a compromise closer to their ideal.

One compromise floated by the SIB would be to insist that the registered traders are obliged to deal with all users of the electronic order book.

But when large blocks of stock are not available on the electronic screens all users of the order book would be entitled to make a phone request to a registered trader for a quote.

SIB officials acknowledge that there is no point in insisting on a system that the Stock Exchange cannot operate, but with stamp duty at stake they have a substantial carrot to persuade the Exchange to modify its proposals.

ebooksAn unforgettable anthology of contemporary reportage
Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London