Pension: FCA to alter ‘dark pools’ rules for all equities – your pensions may be affected

Pension funds are invested into financial markets with the long-term goal of providing retirees with comfortable levels of income in their later years. In early March, the FCA published an update on their plans for financial regulation within the markets.

The FCA confirmed: “Dark trading in equities takes place when the terms on which participants are willing to trade in equity instruments are not made publicly available before the trade is executed.

“The Double Volume Cap (DVC) limits the level of dark trading to a certain proportion of total trading in an equity.

“The temporary power under UK MiFIR allows us to choose to apply the DVC if we consider it necessary to advance our integrity objective, for example, if dark trading is harming the ability of market participants to make well-informed decisions.

“In December, we announced that we would not automatically apply the DVC to UK equities and we are now extending this to all equities.

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Helen went on to comment on why the FCA is making these changes: “So why would the FCA make a statement saying they would not be using it when it seems to help transparency?

“The reality is that ‘dark pools’ do allow institutional investors, like Behemoth Pension Funds to trade shares without impacting the share price and creating market movements that are temporary and not representative of trading volumes.

“So for you and me, it acts to remove extremes and prevent market jitters.

“Only time will tell if not using the DVC benefits the market or just institutional investors.”

As coronavirus emerged, stock markets across the world fell and this impacted defined contribution pensions which tend to invest in the markets.

However, the Pension Advisory Service urged savers to remain calm in the face of volatility and not to make long-term decisions based on short-term events.

While it has been acknowledged that stock market volatility will remain until countries are fully on top of coronavirus, the Pension Advisory Service reminded savers that pensions are long term investments.

While noting nothing is guaranteed, it pointed out that values tend to go up over the long-term.

A similar sentiment was shared by the Money Advice Service, which detailed: “If you’re currently paying into a workplace pension and have several years before you’re planning to draw on your pension, then you’re probably going to be ok.

“In time, it’s likely markets will recover, and it might even be a good time to consider increasing your pension contributions if you can.

“If you’re close to or considering retirement, many pension schemes will have seen their funds life styled. This means your pension will have been moved into predominantly less risky funds such as Cash, Gilts or Bonds.

“That doesn’t mean your pension won’t have taken a hit, but it should be considerably less than if you had remained invested in shares.”

Do you have a money dilemma which you’d like a financial expert’s opinion on? If you would like to ask one of our finance experts a question, please email your query to personal.finance@reachplc.com

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One thought on “Pension: FCA to alter ‘dark pools’ rules for all equities – your pensions may be affected

  1. A wonderful article I found! Thanks to share with all. Your writing is awesome and completely knowledgeable and informative.

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