The battle between banks and exchanges: the battle for fees of private stock trading platforms in the UK

As the wave of financial technology reshapes the ecology of the capital market, the British financial industry is facing a battle for the dominance of new private stock trading platforms. The two giants, traditional banks and stock exchanges, have redefined their spheres of influence in the wave of digitalization, and the game around platform fees, customer resources and regulatory discourse has become increasingly fierce.

At a time when the private stock trading market is booming, emerging demands such as equity trading of unlisted companies and ESG investment products have given rise to the demand for efficient trading platforms. Financial technology companies have taken the lead in entering this blue ocean market with their technological advantages, forcing banks and exchanges to face the survival proposition of digital transformation. Traditional banks have a huge customer base and fund custody advantages, while exchanges have the right to formulate trading rules and liquidity resources. Both sides are competing to build a one-stop service platform, intending to compete for market share by reducing transaction fees and improving service efficiency.

Facing the challenges of exchanges, banks are accelerating the integration of investment banking, asset management and technology department resources to create a full-chain service covering equity financing, transaction settlement and wealth management. HSBC's recently launched "Enterprise Equity Ecosystem Platform" integrates a blockchain equity registration system and smart investment advisory tools to attract customers by reducing the equity financing costs of small and medium-sized enterprises. At the same time, the huge capital pool in the banking system enables it to lower transaction fees through cross-subsidy strategies, squeezing the living space of financial technology companies through price wars.

Not to be outdone, the London Stock Exchange is advancing its "digital market infrastructure" strategy, planning to introduce AI-driven transaction matching engines and distributed ledger technology to improve transaction transparency and efficiency. More importantly, the exchange is lobbying regulators to relax private market trading rules, trying to incorporate more over-the-counter transactions into the on-site regulatory system, and building competitive barriers through compliance advantages. Nasdaq's UK subsidiary has launched a "regulatory sandbox" test to explore providing standardized trading services for unlisted company equity.

Behind this competition are hidden regulatory arbitrage risks. Platforms dominated by the banking system may face antitrust scrutiny, while rule changes promoted by exchanges need to balance innovation and investor protection. The "Private Market Reform White Paper" recently released by the Financial Conduct Authority (FCA) of the United Kingdom proposes to establish a "regulatory technology platform" and requires all private stock trading platforms to be connected to the central monitoring system, which not only creates a threshold advantage for compliant institutions, but may also accelerate market integration.

Against the backdrop of a gradually clear regulatory framework, the competition between banks and exchanges will shift more towards ecological construction. Banks with technological advantages may export infrastructure to exchanges, while exchanges need to use bank channels to reach a wider range of investors. It is foreseeable that more "bank-exchange" joint venture platforms will emerge in the future, and the value chain will be reconstructed through deep integration. For investors, this competition will bring lower transaction costs and richer product choices, but at the same time, they must also be vigilant about the possibility of cross-market transmission of systemic risks.

When the resource endowments of traditional financial institutions collide with digital technology, the private stock trading market in the United Kingdom is ushering in a critical moment of paradigm shift. In this war without gunpowder, whoever can better balance innovation and risk, efficiency and security will be able to take the lead in the wave of digitalization.