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(Market!) Sound check: FCA examines market sounding practices across UK equity capital markets

23 April 2026

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    The Financial Conduct Authority (FCA) has released the findings of its multi-firm review into market soundings in UK equity capital markets (ECM). FCA examined whether market soundings affect market quality in UK listed shares.

    The FCA obtained data from five banks on UK equity and equity-linked ECM transactions over £50 million, 90% of were market sounded. These included accelerated bookbuilds (ABBs), rights offerings, other primary offerings, convertible bonds and IPOs.

    What you need to know:

    • The FCA found no evidence that market soundings negatively affect market quality, with trading volumes, spreads and price behaviour remaining stable during sounding periods.
    • Larger sounding exercises did not proportionally generate greater investor demand, suggesting firms should right-size their market sounding recipient lists. This seems to indicate that the FCA is encouraging the market to focus on reducing the number of recipients sounded.
    • The FCA has explicitly signalled ongoing supervisory focus on market soundings, and firms should proactively review their policies, controls and governance arrangements.

    Context

    The Market Abuse Regulation (Regulation (EU) No. 596/2014) ("EU MAR"), as retained in UK law by virtue of European Union (Withdrawal) Act 2018 ("UK MAR"), under Article 11 of UK MAR, permits disclosing market participants (each a DMP) to disclose inside or confidential information to a market sounding recipient (MSR) as a "market sounding", which will not constitute market abuse where it is carried in accordance with the safe harbour requirements set out in the regime.

    Where the disclosure of inside information is by a person (or someone acting on their behalf) intending to make a takeover bid for a company or a merger with a company, to parties entitled to the securities, this will also constitute a market sounding, provided that:

    • the information is necessary to enable the parties entitled to the securities to form an opinion on their willingness to offer their securities; and
    • the willingness of parties entitled to the securities to offer their securities is reasonably required for the decision to make the takeover bid or merger.

    Key Findings

    The FCA's key findings can be broadly grouped as follows:

    Market quality
    • Trading volumes dropped 13% on average during sounding periods – a statistically significant decline in 70% of sampled transactions-while FTSE 350 volumes rose 5% on the same days.
    • The FCA considered there to be no "material impact" on effective or quoted spread, as well as no consistent evidence of unusual price behaviour.
    • Market cleanliness metrics were considered by the FCA to be "stable", with only isolated cases of significant increases in activity, all of which the FCA confirmed have been appropriately addressed.

    Scale of soundings and demand dynamics
    • High-coverage ABBs with above-average MSR soundings saw no meaningful uplift in demand, suggesting smaller exercises may suffice. 
    • Higher numbers of MSRs did not lead to larger declines in traded volume. 

    Sounding duration and accuracy
    • 56 transactions exceeded communicated timelines-each by (just) one day.
    • Of the launch messages reviewed, the FCA considered all to be fair, clear and not misleading.

    Governance and controls
    • "Syndicate personnel" typically led soundings, with sales, corporate broking and ECM staff also involved. It was noted that compliance and legal involvement varied across banks, with some requiring script approval, whereas others only consulted on an ad hoc and as needed basis.
    • For each MSR reviewed by the FCA, they noted there to be 'gatekeeper' arrangements in place, sitting with either compliance or capital markets, who remained responsible for determining where market soundings should be directed. Initial contact to investment teams in these scenarios was on a no-names basis.
    • The FCA noted that no inadvertent disclosures of sensitive information were reported by the sample banks.

    Key Takeaways

    Firms involved in market soundings should take the following steps in light of the FCA's findings:

    • Right-size your sounding lists: The FCA believe that sounding more investors does not necessarily generate more demand. Although the FCA does not prescribe the number of MSRs that can be sounded, it reminds firms that the risk of inside information leaking may increase as the scale of a market sounding grows. Firms should consider whether their policies and procedures appropriately address the scale of their market soundings.
    • Update your MAR policies to address scale: Policies need to explicitly consider the number of MSRs and duration of soundings as risk factors, not just whether the process was followed. The FCA flagged this gap directly. Where multiple functions undertake soundings within a bank (i.e. sales, corporate broking or ECM), the FCA expects clear and effective oversight to ensure inside information risks are appropriately managed. Firms should take the opportunity to review policies and procedures to ensure there are clear lines of responsibility and effective controls over inside information risk, including the scoping of compliance and legal involvement at each stage.
    • Prepare for supervisory follow-up: The FCA has explicitly signalled ongoing engagement. Firms should proactively conduct self-assessments against the review’s findings.

    The FCA also sought views on Article 11 of UK MAR during the review. Most banks considered the regime to be clear, but suggested potential improvements including greater alignment with the EU market sounding regime and reducing the burden of current record-keeping requirements. The FCA noted that it will consider this feedback in making future changes to the UK MAR.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

    Key Contacts