Wholesale Markets Regulatory Priorities 2026 - Conflicts, AI & Market Reform
The FCA's inaugural Wholesale Markets Regulatory Priorities Report sets out five core expectations for wholesale banks, brokers, trading venues, benchmark administrators, CRAs, and principal trading firms. Key themes include a major new conflicts-of-interest supervisory campaign, market outage resilience, AI governance, T+1 settlement reform, and a post-implementation review of the IFPR.
Context:
Published on 19 March 2026 as part of the FCA's new annual sector-reporting model, the Wholesale Markets report replaces the former portfolio letter approach. It is addressed directly to Boards and Chief Executives, backed by the FCA's Interim Executive Director of Markets, with an explicit warning that where serious failings are identified, 'the FCA will consider all available tools, including enforcement investigations.'
The report reflects a significant expansion in supervisory ambition for the wholesale sector. While the FCA remains committed to outcomes-focused, proportionate oversight suited to sophisticated market participants, it is simultaneously launching a broad multi-firm supervisory campaign targeting conflicts of interest across trading, origination, and prime services, an area where multi-firm reviews were rare under the old portfolio letter model.
On market structure, the report confirms the equity market reforms under PS25/17 went live on 30 March 2026. Further major workstreams include a consultation on bond and equity market structure and transparency (H1 2026), preparation for T+1 settlement by October 2027, the Digital Securities Sandbox with the Bank of England, and the Digital Gilt Instrument (DIGIT) Pilot. For AI and digital assets, the FCA will publish final cryptoasset policy statements in 2026.
Rules and Guidelines:
Operational resilience: firms must embed resilience into governance and daily operations; the FCA will consult on guidance to strengthen market resilience following 2025/26 outages
Financial resilience: enhanced scrutiny of contingency funding and capital adequacy, especially at wholesale brokers and principal trading firms
Conflicts of interest: the FCA will initiate multi-firm reviews of market soundings, prime services, execution in emerging markets, primary market fixed income allocation, and quantitative investment strategies
AI and new technology: firms must establish clear accountability, risk management and oversight for AI, DLT, quantum computing and other new technologies; third-party AI provider concentration is a supervisory concern
Transaction reporting: firms should engage with CP25/32 (improving the UK transaction reporting regime); a Policy Statement is expected Q3 2026
Consumer Duty: the FCA will consult in H1 2026 on clarifying and potentially narrowing the Duty's application to wholesale and cross-distribution chain activities
IFPR post-implementation review: a call for input will be published, followed by a consultation; firms should begin documenting their experience of the regime's operation
Benchmark administrators: a governance review (H1 2026) covering conflicts of interest and conduct oversight
Equity market reforms (PS25/17): these came into force 30 March 2026; firms must embed all related rule changes into their systems
Businesses Affected:
Wholesale banks engaged in securities trading, origination, and prime services, the highest supervisory risk given the conflicts, a multi-firm review programme
Wholesale brokers: subject to contingency funding and capital adequacy reviews, and a separate Q3 2026 review of oversight of overseas branches and subsidiaries
Principal trading firms (PTFs) and high-frequency trading firms in commodity and equity markets
Benchmark administrators, credit rating agencies, and data reporting service providers are subject to governance reviews
Investment firms subject to the IFPR should engage with the upcoming post-implementation review call for input
Trading venues and market infrastructure: market outage resilience consultation and equity market structure reform will directly affect venue operators
Next Steps:
Board and senior management should formally review the FCA's Wholesale Markets report and commission a gap analysis against each of the five priority areas
Begin a structured review of conflict management frameworks across best execution, share buybacks, transaction governance, prime services, and quantitative strategies; prioritise documentation ahead of the FCA's multi-firm review programme
Governance teams should conduct a deep dive on AI usage across trading and risk management functions, with clear ownership and accountability trails for each AI application
Engage with CP25/32 (transaction reporting) and prepare to respond to the market structure consultation (H1 2026)
Track the Consumer Duty wholesale consultation for H1 2026, which may reduce compliance burden for firms not directly serving retail clients
Overseas branch oversight: firms with wholesale broker subsidiaries or branches abroad should conduct an immediate review of oversight standards, given the Q3 2026 multi-firm review
Financial Conduct Authority, Regulatory Priorities
