What is market structure in capital markets?

Market structure refers to how capital markets are organised — including trading venues, the roles of different participants, how orders are matched and executed, and the regulatory framework governing those markets.

What are financial instruments and what regulation applies to them?

Financial instruments include equities, bonds, derivatives, ETFs, and other securities. Each type has specific regulatory requirements, listing obligations, disclosure duties, and risk profiles which need compliance oversight.

What are transparency and reporting obligations for instruments?

These typically include pre-trade and post-trade data publishing, disclosures of material events, financial reporting, insider trading rules, and ensuring that markets are informed and fair.

How does regulatory oversight work in relation to market structure?

Regulatory oversight is exercised by securities regulators, exchanges or trading venue operators, and other authorities. They enforce compliance with listing rules, transparency, market abuse laws, trade reporting and conduct of market participants.

What risk & compliance controls are important for different trading instruments?

Controls should cover instrument-specific risks (e.g. counterparty risk, leverage, settlement risk), governance, documentation, internal policies, monitoring, and regular review of exposure.

How can firms ensure compliance when accessing different trading venues or markets?

They should understand the access criteria, technical / operational requirements, settlement and clearing processes, local regulatory obligations, possible cross-border issues, data standards, and ensure internal controls / policies reflect those requirements.

Capital Market Structure | Trading Instruments Overview

Market Structure & Instruments

The United Kingdom (UK) is a leading global financial hub, with London as its centre. Its financial markets are diverse, covering equities, bonds, derivatives, foreign exchange, commodities, and money markets, all structured to ensure transparency and investor protection.

Market Segments

The UK financial markets are divided into multiple segments, each catering to different types of investors and trading purposes. These segments facilitate capital raising, risk management, and investment opportunities.

Equities

Primary platform: London Stock Exchange (LSE)

Functions

Issuing shares (primary market), trading shares (secondary market).

Debt (Bonds)

Includes gilts issued by the UK government and corporate bonds, traded via the LSE’s Order Book for Retail Bonds (ORB) or over-the-counter (OTC) transactions

Derivatives

Exchange-traded products through Intercontinental Exchange (ICE) Futures Europe and the London Metal Exchange (LME), as well as OTC contracts such as swaps, forwards, and options, used for hedging, speculation, and arbitrage.

Foreign Exchange (FX)

London is the world’s largest foreign exchange centre, with most trading conducted over-the-counter among banks, financial institutions, and corporates.

Commodities

Led by the London Metal Exchange (LME) for metals and energy markets including Brent crude and natural gas futures

Money Markets

Instruments such as Treasury bills, commercial paper, repurchase agreements (repos), and certificates of deposit, supporting liquidity management.

Core Instruments

The UK markets employ a range of financial instruments to meet the needs of investors, traders, and issuers. Each instrument type has specific uses, risk profiles, and regulatory requirements

Equities – Ordinary shares and preference shares.
Bonds – Gilts, corporate bonds, and municipal bonds.
Derivatives – Futures, options, and swaps.
Foreign Exchange – Spot contracts, forward contracts, and currency swaps
Money Markets – Treasury bills, repurchase agreements, certificates of deposit.
Commodities – Energy and metals contracts

Key Institutions

A strong institutional framework ensures market integrity, investor protection, and financial stability in the UK. These institutions regulate, supervise, and facilitate trading across all market segments

London Stock Exchange (LSE) – Equities and bonds trading.
Bank of England (BoE) – Monetary policy and financial stability.
Financial Conduct Authority (FCA) – Market conduct regulation and investor protection
Prudential Regulation Authority (PRA) – Oversight of banks and insurance companies.
Intercontinental Exchange (ICE) Futures Europe & London Metal Exchange (LME) – Derivatives and commodities trading.

Trading & Settlement

Efficient trading and settlement systems are critical for market confidence and risk management. Different segments rely on specific platforms and clearing mechanisms to ensure smooth operations.

Equities & Bonds – Traded via the LSE’s Stock Exchange Electronic Trading Service (SETS) order book or over-the-counter, with settlement through the Central Securities Depository (CREST).
Derivatives – Cleared through central counterparties such as London Clearing House Limited (LCH Ltd).
Foreign Exchange & Money Markets – Settled through Continuous Linked Settlement (CLS) or interbank systems

Issuer Obligations

Issuers of securities must provide accurate and timely information to maintain investor trust. Regulatory obligations include prospectus requirements and ongoing disclosure duties.

Prospectus Requirements – Public securities offerings generally require a prospectus approved by the Financial Conduct Authority, unless exempt (e.g., small-scale offers, private placements). Prospectuses must be accurate, complete, and not misleading.
Ongoing Disclosure – Includes annual and half-yearly reports, prompt disclosure of inside information under the Market Abuse Regulation (MAR), maintenance of insider lists, and shareholder notification thresholds starting at 3%.

Market Conduct & Enforcement

Maintaining fair and transparent markets requires strict enforcement against misconduct. Regulatory measures deter malpractice and ensure equal treatment of market participants.

Market Abuse – Insider dealing and market manipulation are prohibited under the Market Abuse Regulation (MAR) and the Criminal Justice Act 1993.
Takeovers & Mergers – Governed by the Takeover Code, which requires equal treatment of shareholders and mandatory offers when more than 30% of voting rights are acquired.
Enforcement – The Financial Conduct Authority may impose fines, restrictions, suspensions, public censures, and criminal prosecutions to deter misconduct and protect market integrity.

Post-Brexit Framework

The UK continues to adapt EU-derived rules while establishing its domestic regulatory framework. Post-Brexit rules provide clarity on cross-border access and financial stability.

Emerging Trends

Innovation, sustainability, and evolving investor demands are shaping the future of UK financial markets. Regulators are introducing new standards and oversight mechanisms to address these trends

Environmental, Social, and Governance (ESG) & Climate Disclosures – Task Force on Climate-related Financial Disclosures (TCFD)-aligned reporting standards.
Prospectus Reform – Simplifying capital-raising processes.
Financial Technology (FinTech) & Digital Assets – Expanding regulation of cryptoassets and tokenised securities.
Special Purpose Acquisition Companies (SPACs) & Alternative Listings – Increased oversight of non-traditional listing structures.