On Apr. 3, 2025, UK FCA issued policy statement PS25/2 giving summary of feedback to consultation, how FCA responded, final rules, and framework for DTO exemptions.
FCA received unanimous support on how it intended to exercise its power of direction to modify the DTO to replace direction modifying DTO, issued final direction Nov. 2024.
Policy statement covers other proposals in consultation: inclusion of SOFR OIS to the DTO, and regulatory regime applicable to post-trade risk reduction services (PTRRS).
FCA received broad support on proposals, so will proceed with adding all tenors it consulted on the scope of the DTO, subject to a technical amendment on the 12-year tenor to ensure greater international alignment with scope of trading obligation in US.
Will also proceed as consulted as regards timelines, with rules on the DTO and post-trade risk reduction services coming into force 3 months after publication of PS25/2.
The Technical Standards (Markets in Financial Instruments Regulation) (Derivatives Trading Obligation and Transparency) (Amendment) Instrument 2025 (FCA 2025/7) modifies onshored Commission Delegated 2017/2417 regulatory technical standards.
The instrument and the changes made by it come into force on Jun. 30, 2025.
The Markets in Financial Instruments Regulation (Post-Trade Risk Reduction Services Rules) (Amendment) Instrument 2025 (FCA 2025/8) amends Glossary to FCA HB.
Updates GEN Sch 4.3, inserts a new chapter MAR 12Post-trade risk reduction services.
Rules come into force on Jun. 30, 2025, providers of eligible risk reduction services must notify FCA of details set out in MAR 12.6 before providing service for first time.
Information on how to notify found in Chapter 3 of PS25/2 and on FCA's guidance pageUK MiFID framework notifications in new section Post-trade risk reduction services.
FCA issued consultation on the derivatives trading obligation and post-trade risk reduction services, to help improve regulation of secondary markets and reduce risk.
This forms part of FCA's work on strengthening UK capital markets, see see #220892.
The consultation is part of the Wholesale Markets Review (WMR), the review of UK wholesale financial markets FCA has been conducting with UK Treasury since 2021.
Supports FCA commitment to strengthen the UK's position in wholesale markets.
The Financial Services and Markets Act 2023 (FSMA 2023 (UK)) amended parts of UK MiFIR to give FCA the necessary powers to deliver the reforms set out in the WMR.
Consultation
FCA sets out proposals on 3 distinct but interconnected aspects of the derivatives trading obligation (DTO), proposals are supported by FCA Markets Practitioners Panel.
Proposes including certain overnight index swaps (OIS) based on the US Secured Overnight Financing Rate (SOFR) in classes of derivatives subject to the DTO.
Expanding list of post-trade risk reduction services exempted from the DTO and from other obligations; and how FCA intends to use power to suspend or modify the DTO.
Once the regulator's powers under Part 7 of the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 expire at the end of 2024.
The proposals aim to improve the UK's regulation of secondary markets, reduce systemic risk in derivatives markets, and avoid fragmentation and disruption for firms trading over-the-counter (OTC) derivatives subject to the DTO.
Consultation End
The closing date for submission of responses to the consultation is Sep. 30, 2024.
Based on responses, FCA will finalize draft rules, guidance, technical standards and policy statement, it plans to issue a direction on modification of the DTO in Q4 2024.
On Apr. 3, 2025, UK FCA issued policy statement PS25/2 giving summary of feedback to consultation, how FCA responded, final rules, and framework for DTO exemptions.
FCA received unanimous support on how it intended to exercise its power of direction to modify the DTO to replace direction modifying DTO, issued final direction Nov. 2024.
Policy statement covers other proposals in consultation: inclusion of SOFR OIS to the DTO, and regulatory regime applicable to post-trade risk reduction services (PTRRS).
FCA received broad support on proposals, so will proceed with adding all tenors it consulted on the scope of the DTO, subject to a technical amendment on the 12-year tenor to ensure greater international alignment with scope of trading obligation in US.
Will also proceed as consulted as regards timelines, with rules on the DTO and post-trade risk reduction services coming into force 3 months after publication of PS25/2.
The Technical Standards (Markets in Financial Instruments Regulation) (Derivatives Trading Obligation and Transparency) (Amendment) Instrument 2025 (FCA 2025/7) modifies onshored Commission Delegated 2017/2417 regulatory technical standards.
The instrument and the changes made by it come into force on Jun. 30, 2025.
The Markets in Financial Instruments Regulation (Post-Trade Risk Reduction Services Rules) (Amendment) Instrument 2025 (FCA 2025/8) amends Glossary to FCA HB.
Updates GEN Sch 4.3, inserts a new chapter MAR 12Post-trade risk reduction services.
Rules come into force on Jun. 30, 2025, providers of eligible risk reduction services must notify FCA of details set out in MAR 12.6 before providing service for first time.
Information on how to notify found in Chapter 3 of PS25/2 and on FCA's guidance pageUK MiFID framework notifications in new section Post-trade risk reduction services.
