The Financial Conduct Authority (FCA) has published its own evidence that at least three quarters of UK retail share trades are executed at prices that do not comply with the tick size regime already binding on the firms executing them — a supervisory finding about live non-compliance, not a new proposal, and it sits in chapter 7 of a consultation whose public launch led on something else entirely.

In CP26/30, Supporting equity market transparency and considering market structure developments, published on July 31, 2026, the FCA reports that a sample of UK-listed share trades executed over a single week in March 2026 showed adherence to the tick size regime “no greater than 25% by volume of trades” (paragraph 7.26). The obligation is not new: tick sizes have applied to Retail Service Provider (RSP) trades throughout. The measurement is. This analysis walks through the rule, the arithmetic of the breach, how the United States and the European Union treat the same conduct, and what the finding requires of brokers, market makers and systematic internalisers (SIs) before the consultation closes on October 16, 2026.

Methodology and sources

This analysis rests on the full text of CP26/30 as published on July 31, 2026, principally chapter 3 (market structure data), chapter 4 (the SI regime), chapter 5 (algorithmic trading), chapter 7 (retail trading) and Annex 2 (cost benefit analysis). Legal references are taken from the consolidated text of Article 17a of UK MiFIR and the tick size table at the Annex to UK MiFID RTS 11 (the UK version of Commission Delegated Regulation (EU) 2017/588). Comparative material comes from the SEC’s adopting release of September 18, 2024 and from a settled 2014 administrative order. The FCA’s own trading data covers a sample week in March 2026 for the tick analysis and Q4 2025 to Q1 2026 for the SI and execution-mechanism statistics; the FCA notes its RSP figures are estimates, because no identifier marks an RSP trade. Jurisdictional scope is the United Kingdom, the European Union and the United States. No enforcement action has been announced in relation to the tick finding.

What the tick size regime actually requires

The tick size regime fixes the permissible price increments at which shares may be quoted and traded. Under UK MiFID RTS 11, the increment for a given share is set by a grid combining its price and its average daily number of transactions: a share priced between £5 and £10 in the most liquid band (9,000 or more average daily transactions) carries a tick of 0.001, or one-tenth of a penny, while a £1.50 share in the same band carries 0.0002. The grid runs from 0.0001 up to 500 currency units at the extremes.

The tick size regime is a pricing-increment rule, not a price-quality rule. It states the increments at which orders, quotes and executions may be priced, and says nothing about whether the resulting price is favourable. Article 17a of UK MiFIR is explicit that a systematic internaliser’s “quotes, price improvements on those quotes and execution prices shall comply with tick sizes”, subject to one carve-out: applying tick sizes “shall not prevent systematic internalisers matching orders at mid-point within the current bid and offer prices”. CP26/30 paragraph 7.24 restates the perimeter: the obligation “applies to orders executed on trading venues and to quotes, price improvements and execution prices by SIs. There are some minimal exceptions to this requirement, principal of which are trades agreed at mid-point.” Paragraph 7.28 confirms that the remaining exemptions are narrow, covering block trades and systems operating under a pre-trade transparency waiver such as reference price systems.

The RSP system pulls retail flow inside that perimeter. A retail broker sends a request for quote to liquidity providers through an RSP hub; the providers, generally market makers registered with a trading venue, return quotes that live for roughly 10 to 15 seconds. Because those market makers report the resulting fills under venue rules in their capacity as market makers, CP26/30 paragraph 7.25 concludes that “because RSP trades they undertake are on-venue trades, they are subject to the tick size regime. This means that any price improvement offered on their published quotes must comply with the tick-size regime.”

That is why the direction of the obligation matters. The FCA is not proposing anything here. Paragraph 1.16 describes this part of the paper as work that “underscore[s], without changing the rules, important existing expectations”. No transition period is offered for the tick point, because none is needed.

Better than the market and outside the rule at the same time

The finding is uncomfortable precisely because the same dataset shows the RSP system delivering good prices. Paragraph 7.17 records that, for RSP trades below £50,000, 86% executed better than the best bid-offer touch displayed on a UK central limit order book (CLOB), 5% executed at the touch and 8% executed worse. Paragraph 7.18 puts the median improvement at approximately 1 basis point, about 36% of the average quoted spread. Set against the 80% benchmark from the FCA’s Investment Platforms Market Study of 2019, cited at paragraph 7.19, the system clears the quality bar comfortably — while failing the increment rule three times out of four.

Paragraph 7.27 sharpens the point: “around 27% of retail trades had price improved by less than one-fifth of a tick”. On a £7 share in the most liquid band, one-fifth of a tick is 0.02 pence. That is a real improvement in the client’s favour and, on the FCA’s reading, an impermissible increment. A firm can therefore beat the lit market and breach the rule governing how it does so, in the same fill. Existing best-execution management information is built to measure the first thing and is structurally blind to the second, because price improvement is recorded as a benefit rather than tested against a grid.

How three regimes treat sub-increment price improvement

Jurisdiction / regulator	Instrument and date	Scope	Key requirement	Penalty / sanction
UK (FCA)	Article 17a, UK MiFIR; UK MiFID RTS 11; onshored December 31, 2020	Trading venues, SIs, RSP market makers executing on-venue	Quotes, price improvements on those quotes and execution prices must be on tick; mid-point matching exempt	Financial penalty under section 206, Financial Services and Markets Act 2000, calculated under DEPP 6.5A; CP26/30 signals supervisory follow-up rather than enforcement
EU (ESMA and national competent authorities)	Article 17a, MiFIR, inserted by Regulation (EU) 2019/2033 of November 27, 2019	Systematic internalisers in shares, depositary receipts and exchange-traded funds	Identical wording: SI quotes, price improvements and execution prices must comply with tick sizes; mid-point carve-out preserved	National sanctioning regimes under Article 70(6)(f), MiFID II — for a legal person, maximum administrative fines of at least EUR 5,000,000 or up to 10% of total annual turnover per the last approved accounts
US (SEC)	Rule 612, Regulation NMS (2005); amended September 18, 2024, compliance from the first business day of November 2025	Exchanges, brokers and dealers displaying, ranking or accepting orders in NMS stocks	Minimum increments of $0.01 or, after the 2024 amendments, $0.005 for qualifying stocks priced at or above $1.00 — for quotations and orders, not execution prices	Civil money penalties; $4.5 million against the NYSE entities and Archipelago Securities, Release No. 34-72065, May 1, 2014

Sources: CP26/30; legislation.gov.uk consolidated texts of UK MiFIR and UK MiFID RTS 11; SEC press release 2024-137; SEC Release No. 34-72065. Last updated: August 24, 2026.

The divergence between the UK and the US is written into the rules, not into enforcement appetite. Rule 612 of Regulation NMS reaches quotations, orders and indications of interest; it does not, by its terms, cap the price at which a trade prints. That is why sub-penny price improvement is a routine and lawful feature of US retail wholesaling, and why the American debate has been about whether the increment should shrink rather than whether improvement inside it is permissible. The SEC’s answer in 2024 was to shrink it, adding a $0.005 increment “for quotations and orders in NMS stocks that are priced at, or greater than, $1.00 per share”, assigned by reference to a Time Weighted Average Quoted Spread. The UK took the opposite structural route: Article 17a names execution prices alongside quotes, so the increment follows the trade to the print. The EU wording is identical, because both derive from the same 2019 amendment, made to stop SIs undercutting lit venues by amounts smaller than a tick. The FCA has now measured that behaviour in a channel the drafters were not thinking about.

“UK equity markets have evolved through competition, innovation and the choices made by investors and companies. These continue to be great foundations for a liquid and resilient market. A downside of choice can be complexity, but this needn’t mean a lack of transparency. A consolidated tape will make it simpler and easier for investors to see the whole market picture. Today’s package settles the big design questions and sets the path to deliver the tape within the next 18 months.”

— Simon Walls, Executive Director of Markets, Financial Conduct Authority (FCA press release, July 31, 2026)

That statement is the FCA’s entire public framing of the day CP26/30 landed. The press release runs to four named quotes and does not mention tick sizes, RSP execution or the 25% figure. The tape is the announcement; the compliance finding is on page 96. The bond equivalent went live in June 2026 and has drawn more than 1.6 million licence subscriptions, and readers following that thread will recognise the pattern from the UK bond consolidated tape going live ahead of the EU’s provider selection.

Enforcement context: the only real tick-size case is American

There is no published UK Final Notice for a tick size breach, which is part of why the finding has gone unremarked. The nearest precedent anywhere is In the Matter of New York Stock Exchange LLC, NYSE Arca, Inc., NYSE MKT LLC and Archipelago Securities, L.L.C., Administrative Proceeding File No. 3-15860, Release No. 34-72065, settled on May 1, 2014 for a collective penalty of $4.5 million.

Among the findings, the SEC held that “Rule 612(a) of Regulation NMS prohibits an exchange from displaying, ranking, or accepting any order in a sub-penny amount for NMS stocks trading at a price greater than $1.00 per share. Between January 2, 2009, and October 7, 2010, Arca repeatedly violated Rule 612(a) by accepting mid-point passive liquidity orders with sub-penny limits.”

“The SEC regulates exchanges, in part, by reviewing rules proposed by the exchanges that govern exchange activities and allow market participants to decide how and where to place orders. We will hold exchanges accountable if they fail to have rules governing their operations or fail to follow them.”

— Andrew J. Ceresney, Director, Division of Enforcement, US Securities and Exchange Commission (SEC press release 2014-87)

Two features of that case travel. The breach was mechanical rather than deliberate: a system change permitted an order type to be accepted at increments the rule did not allow, and the condition persisted for roughly 21 months. That is the shape of the exposure CP26/30 describes — pricing logic producing impermissible increments at scale, not misconduct by any individual trader. And the offending order type was the mid-point order, which is the principal exemption in the UK regime and, in the US, the vector for the only significant Rule 612 penalty on record. Firms relying on the mid-point carve-out to explain off-tick prints should be able to evidence that the trades settled at mid rather than near it.

What this means for brokers, RSP market makers, SIs and compliance teams

Retail brokers. The population is small and identifiable — at least 60 firms, most connected to two or three hubs with one carrying the majority of liquidity. The immediate task is to reconcile two datasets usually kept apart: the price-improvement statistics used for best-execution reporting, and each executed price tested against the RTS 11 grid for that instrument on that day. A firm that reports 86% better-than-touch and cannot state its on-tick percentage has a reporting gap, not a healthy scorecard.

RSP liquidity providers. Around 20 firms provide the quotes. Quote-generation logic that computes improvement as a fraction of the spread will systematically produce off-tick prices; logic that computes it as an integer number of ticks will not. Where mid-point is relied on, the reliance should be documented instrument by instrument rather than assumed.

Systematic internalisers. Chapter 4 shows the 22 UK equity SIs quoting on the regulatory floor: about 45% of quotes sit in the narrow 9% to 11% band around the 10%-of-standard-market-size minimum, while roughly 60% of executions are above 15% of standard market size. With 99% of UK shares carrying a standard market size of €10,000, the minimum quote is €1,000 — a floor operating as a ceiling. SIs should model quoting up to standard market size rather than at the minimum.

Algorithmic market makers. Chapter 5 proposes to revoke UK MiFID RTS 8 “in its entirety, removing both its requirements on algorithmic trading firms to enter into market making agreements and the related obligations on trading venues” (paragraph 5.13). It is the largest operational change in the paper and has attracted almost no comment. Firms whose venue relationships are papered on RTS 8 agreements need to know what replaces them.

Legal and compliance. Because the obligation predates the paper, the exposure is retrospective, and it interacts with reporting obligations covered elsewhere in this market: see our analysis of the FCA moving MiFID equity transparency into its own Handbook and of the removal of FX derivatives from UK transaction reporting by 2028.

“We welcome the FCA’s proposals to improve transparency and access to market data in UK equity markets. The package recognises that UK markets are functioning effectively while taking practical steps to make market-wide information easier to access and use. This is a proportionate and evidence-based approach to market reform.”

— Adam Farkas, Chief Executive Officer, Association for Financial Markets in Europe (FCA press release, July 31, 2026)

The industry response is worth steelmanning. If retail clients are systematically receiving better prices than the lit market offers, and the FCA’s own data says they are, then a rule that makes some of those improvements impermissible is a rule that penalises a good outcome for a technical reason. The counter-argument is that increments exist to protect price formation on lit venues, and the CLOB share of notional traded has fallen from around 40% to closer to 25% (paragraph 3.27) while SI trading reached 20% of FTSE 350 notional in Q1 2026. Sub-tick improvement is one of the mechanisms by which bilateral execution outcompetes the order books that produce the reference price it improves upon.

What’s next: the forward view

Responses to CP26/30 are due by October 16, 2026, with a Policy Statement expected in the first half of 2027. Three threads are worth watching.

First, the cost benefit analysis. The FCA scored the package at a net present value of −£6.14 million over a 10-year appraisal period, with quantified benefits of £3.4 million against £9.6 million of one-off costs. SI pre-trade changes alone account for £3.9 million across 11 large, eight medium and three small firms, and the FCA calculates that the proposals must deliver roughly £20.5 thousand per SI per year in unquantified benefits merely to break even. Respondents who wish to contest the package have an unusually direct opening: the regulator has already conceded that the arithmetic does not close on quantified terms alone.

Second, the retail flag. Question 24 asks whether trades should carry a marker identifying retail flow. The FCA is explicit that it is “not proposing the introduction of the flag before gathering a broader set of views through this CP” and that “most of those we have spoken to have not been in favour of it” (paragraphs 7.31 and 7.34). The objections are practical: chains of execution would have to pass client status down the chain, and “retail client” would need a definition resolving whether the test is residence or location.

Third — and this is where a UK equities question becomes a contract-for-difference (CFD) question — the same respondent proposed extending the flag to share trades hedging a CFD with a retail underlying client (paragraph 7.29), while Questions 8 and 9 seek views on extending public reporting to equity swap activity and tokenised forms of equity exposure. None of this is a proposal, and the FCA records that sentiment runs against it. But CFD hedging books that touch UK cash equities are being discussed in a transparency consultation for the first time, and the perimeter question follows the logic of the client-classification split examined in CP26/23 and the division of UK CFD books into UK and non-UK clients. Desks that assume UK equity market structure is not their file should read chapters 4 and 7 before October 16.

Frequently asked questions

Is the FCA introducing a new tick size rule for retail trades?

No. The tick size regime already applies. Article 17a of UK MiFIR requires systematic internalisers’ quotes, price improvements and execution prices to comply with tick sizes, and CP26/30 paragraph 7.25 states that RSP trades are on-venue trades caught by the regime. Paragraph 1.16 describes this part of the paper as underscoring existing expectations “without changing the rules”. What is new is the FCA’s published evidence that the rule is widely not being met. No transition period is proposed, because the obligation is already live.

What exactly does “off-tick” mean?

A trade is off-tick when its execution price is not an exact multiple of the minimum price increment set for that instrument under UK MiFID RTS 11. Increments come from a grid combining the share’s price band and its average daily number of transactions, running from 0.0001 upwards. An improvement of one-fifth of a tick lands between two permissible increments: better for the client, but not a price the regime permits the firm to print.

Does the mid-point exemption cover most of these trades?

The FCA says it does not. Paragraph 7.26 specifies that the off-tick trades observed include “transactions that are not at mid-point of the best bid-offer”, and paragraph 7.28 limits exemptions to certain transaction types such as block trades, or trading systems operating under a pre-trade transparency waiver such as reference price systems. Firms relying on mid-point should be able to demonstrate, instrument by instrument, that trades settled at mid rather than near it.

How can execution be both better than the lit market and non-compliant?

Because the regime governs increments, not price quality. Paragraph 7.17 records 86% of RSP trades below £50,000 executing better than the touch price displayed on a UK order book, with a median improvement of about 1 basis point. Improvement smaller than one full tick still benefits the client while using an increment the rule does not allow. Best-execution reporting measures the benefit and never tests the increment, so the breach stays invisible in standard management information.

Who is in scope of CP26/30?

The FCA names trading venues, investment firms including systematic internalisers, UK branches of overseas firms carrying out investment services and activities, and approved publication arrangements. For the retail chapter specifically, the population is at least 60 retail brokers and 20 RSP liquidity providers connected to RSP hubs — principal trading firms are around 50% of that market by notional — plus the 22 equity systematic internalisers operating in the UK.

Does this affect CFD providers?

Not directly, and not yet. Paragraph 7.29 records a respondent’s suggestion that a retail flag extend to share trades hedging a CFD with a retail underlying client, and Questions 8 and 9 seek views on extending public reporting to equity swap activity and tokenised equity exposure. No rule is proposed, and the FCA reports that most participants it consulted do not favour a flag. Providers whose hedging books touch UK cash equities should still respond by October 16, 2026.

This article is informational analysis only and does not constitute legal, regulatory, tax, or investment advice. Regulatory frameworks change frequently and interpretation depends on facts and circumstances; primary documents and official regulator guidance always supersede summaries. Firms should consult qualified legal counsel and their relevant supervisory authority before taking any action based on the analysis above.

Image: London Stock Exchange, Paternoster Square, licensed under CC BY-SA 3.0, via Wikimedia Commons.