Bank of England has pushed back on the FCA’s proposal to relax capital rules for specialist market‑making firms such as Citadel Securities, Jane Street and Hudson River Trading. The FCA’s December plan aims to free up capital and boost liquidity, but BoE officials fear weaker buffers could amplify systemic risk if a firm falters.

BoE officials argue that trading firms must remain able to weather market stress, noting that banks rely on them for financing and clearing services. Rebecca Jackson, an executive director, warned that lenders need stronger risk‑management frameworks to cope with the growing exposure to high‑speed traders. The regulator sees the proposal as potentially undermining that safety net.

Proponents, including the European Principal Traders Association, contend that UK banks face a “bank‑type” capital regime that squeezes liquidity, arguing the rules should reflect the actual systemic footprint of non‑deposit‑taking firms. They point to the post‑2008 electronification of markets, where firms like Citadel Securities now handle hundreds of billions of dollars in trades each second.

Traditional banks, represented by the Association for Financial Markets in Europe, warned the FCA that easing capital could increase the likelihood and impact of systemic shocks. With the BoE’s financial policy committee holding authority to intervene, the dispute signals a broader regulatory tug‑of‑war over how to balance market depth with prudential safety. The FCA is expected to issue revised rules later this year.