In this exclusive article, Xiang Yu, Signal Product Team at Confluence Technologies, outlines why compliance may be getting simpler on paper but not in practice. She explores why regulatory reform often creates new operational demands, and what compliance teams need to do to keep pace as rules evolve.
The ideal state of regulation is one in which rules are simultaneously as simple and as comprehensive as possible. Acceptable behaviour is clearly delineated and understood by all affected parties. It is obvious when a person or entity has crossed a line. If only it were so simple.
The messy nature of financial markets means that reaching this platonic ideal is frequently impossible. Yet regulators still need to try. In recent years, the US, Europe, and the UK have all cited simplification as a key success metric for reform. The problem is what happens between the initial consultation, the revision cycles, the commentary periods, and the final implementation. The intention for simplification is there, but it is not always immediately achieved. Operational complexity arrives with new rules.
The process of reform, even explicitly deregulatory reform, can add to compliance workloads rather than reduce them. When the FCA published PS26/5 in April, Jon Relleen, the regulator’s director of infrastructure and exchanges, called the new short-selling regime “smarter regulation in action.” The Reportable Shares List, a live, machine-readable register of shares admitted to trading on UK venues that are subject to short-selling rules, replacing the previous static list of exempt shares, tests that claim.
Under the new RSL, firms must continuously monitor and ingest that file. For issuers with multiple share classes, firms need to look beyond it to capture all relevant classes admitted to trading. Net short position calculation engines need retesting against the new in-scope universe. Internal controls documentation needs updating.
The FCA published a test version of the RSL in April to give firms time to prepare. Firms still completing their ingestion logic — or still testing their calculations against it — are running out of runway. Phase 1 of the new UK regime goes live on 13 July. Phase 2 (bulk submission capability) follows on 30 November.
The past two years of regulatory action across the UK, EU, and US share a common characteristic: investment managers fined by BaFin, the SEC, and the FCA for ownership and disclosure reporting failures had systems left unchanged from a previous regime, processes carried forward untested, and assumptions held over from an earlier framework.
The broader pattern is the same everywhere. The UK’s short selling changes are one node in a set of parallel reforms affecting the same firms simultaneously. Japan and Australia are moving to capture delta-adjusted, cash-settled derivatives in their disclosure frameworks. Separate implementation with different timelines, different technical specifications, different scoping rules, the same direction of travel.
For a global manager, that shared direction means building out parallel jurisdiction-specific compliance infrastructure. From this vantage point, regulatory simplification in any one market tends to shift the operational burden rather than lift it. The aggregate workloads remain despite the changing shape of the problem.
EY’s 2026 global regulatory outlook describes this moment as one of localisation — national regulators rewriting rules to match domestic competitiveness goals, with international firms absorbing the divergence. A roundtable of global asset managers earlier this year and found the same result: firms expecting deregulation in one jurisdiction to reduce aggregate complexity consistently find the opposite to be true.
PwC’s Global Compliance Survey put a number on it: 85% of compliance professionals reported requirements have become more complex in recent years, and identified regulatory change itself (pace and continuity) as the primary operational risk.
Infrastructure investments compound as regulatory changes accumulate. A new version, a new cycle, a revised framework: each requires the same effort from compliance departments, regardless of what it is called. Build for continuity of change rather than point-in-time compliance and that effort compounds in the company’s favour. That’s true simplicity.
By Xiang Yu, Signal Product Team at Confluence Technologies
