Rathi warns of an 'innovation delta' and promises more assertive use of FCA powers

On 22 October Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), used his speech at the City of London Corporation’s annual City Dinner to argue that UK institutions are falling behind fast-moving markets. He said the FCA would respond by making “more assertive use of its powers”.

“While we may be getting past peak rule making, we are nowhere near peak reform or innovation,” Rathi said, according to the FCA’s drafted text, which “may differ from the delivered version”. Nor, he added, are we past “the peak intervention required to disrupt harm”.

The ‘innovation delta’

Rathi said the UK risks a “dangerous ‘innovation delta’”, in which regulators and the bodies that hold them to account lag behind new products. He cited three changes in wholesale markets:

• decentralised finance
• “24/7 trading a reality with prices increasingly forming over weekends”
• “parallel market structures operating alongside traditional ones”

“The threats to market integrity are as serious as I have seen them,” he said. He listed “unprecedented volatility, concentration risks, new forms of market abuse and rampant cross-border financial crime”.

He also said the regulator will need to decide questions such as “when agentic coordination becomes market manipulation”. AI tools and agents are giving supervisors “a richer risk picture”, he said, by parsing large data sets and assessing cases.

Beyond the perimeter

The most significant passage for markets was on the FCA’s perimeter. Rathi said the authorisation perimeter, set by government and Parliament, is “our anchor. But we cannot let it weigh so heavily that it sinks the regulatory ship.” Among examples of harms “within our remit originating outside it”, he listed “insider trading on offshore gambling or prediction markets”. He also mentioned mass digital harm on social media and outages such as “Google Cloud this week”.

He pointed to tools Parliament has already provided:

• the Enterprise Act, the Consumer Rights Act, the Online Safety Act and the Digital Markets Act
• the critical third parties regime
• the FCA’s expanding anti-money-laundering remit

“It isn’t enough to ask: is this in our perimeter?” he said. The question should be what powers the FCA has to tackle a harm, and whether doing so is a good use of resources.

Other points from the speech:

• Enforcement: the FCA, working with the Metropolitan Police, the National Crime Agency and HMRC, has recently carried out “2 of our most significant operations” against suspected organised criminal gangs.
• Digital assets: an FCA–Bank of England roadmap on digital assets is coming “soon”.
• Compliance burden: deputy chief executive Sarah Pritchard will work with firms to cut duplicative assurance and to consider “if it’s time to look again at the 3 lines of defence”.
• Financial crime: new chief operating officer Johan Sekora will lead work to look beyond KYC processes so the FCA can “unearth actual money laundering”.
• Courts: Rathi suggested that dedicated financial services courts, as used in other markets, could speed things up.

Why it matters

For market-abuse surveillance teams, the reference to insider trading on offshore prediction markets is notable. Event contracts on UK corporate or policy outcomes that trade outside the FCA’s perimeter could still lead to action under the regulator’s other powers when they connect to UK-listed securities or regulated persons. Firms’ personal-account dealing policies may need to cover these venues explicitly.

The comments on 24/7 trading and weekend price formation echo his September speech on tokenisation. Venues and brokers offering extended hours should expect surveillance expectations to cover the weekend, not only the London trading day.

Sources

• FCA, “Market integrity in the digital age”, speech by Nikhil Rathi, 22 October 2026 — https://www.fca.org.uk/news/speeches/market-integrity-digital-age