FCA to Exempt FX Derivatives from Reporting in £100 Million Reprieve

The UK’s financial regulator is proposing to do away with transaction reporting requirements for FX derivatives in a move that could save the industry £100 million every year.

The Financial Conduct Authority’s plans impact more than 400 firms and involve removing reporting requirements for over six million financial instruments, including equities, bonds and certain derivatives that are only traded on EU venues. It further proposes to reduce the period for correcting historical errors to three years from the current five, lowering the number of transaction reports that need to be submitted by a third.

Transaction reporting rules were introduced in 2018 and on-shored from the EU on 31 December 2020. The current annual cost of MiFID transaction reporting to industry is £493 million and the FCA estimates this will decline to £385 million as a result of its proposed changes.

The regulator says it’s “working to deliver a streamlined framework that will cut costs for business while ensuring effective regulatory oversight of the UK’s world-leading capital markets”, adding that the current proposals will support growth and improve the quality of data it receives, which currently include more than seven billion MiFID transaction reports a year.

Therese Chambers, joint executive director of enforcement and market oversight, says these plans will ensure that the FCA is using smarter ways of ensuring market integrity and resilience. “Reducing costs while improving the quality of the data we receive is a no-brainer. It means we can support growth and receive better market intelligence to act on,” she says.

The plans are part of a new long-term approach to transaction reporting, the FCA says, adding that it will work with the Bank of England and Treasury to streamline requirements and reduce duplication across different data collections, including UK MiFIR, EMIR and SFTR.