DP24/2 Review: FCA’s Vision for UK’s Transaction Reporting Regime

DP24/2: What’s on the Table?

The FCA has outlined several objectives and proposed changes that could reshape how transaction reporting is handled in the UK.

Streamlining Data Submission and Improving Quality

To reduce redundancies, the FCA proposes removing fields such as certain instrument reference data where similar information is already submitted by trading venues.  This simplification could reduce administrative burdens for firms while maintaining data utility.

Another suggestion includes introducing an aggregate client linking code, which would help track linked transactions across complex trade structures, enhancing the FCA’s ability to monitor market activity and detect abuse.

Refining MiFID II Transaction Reporting Fields

Certain fields that commonly cause errors are being reassessed. For instance:

• The “transmission of order” indicator, used to track the chain of execution between parties, will be reviewed to clarify its purpose and reduce reporting inaccuracies.
• Fields related to pricing and quantities, particularly in instruments like equity swaps, will be refined to address ambiguities and improve consistency in reporting.

Flexibility for Post-Brexit Cross-Border Transactions

Post-Brexit, cross-border reporting has become increasingly complex.  To address this, the FCA proposes granting firms greater flexibility in determining reporting responsibilities for transactions involving non-UK entities.  Simplified requirements could ease the burden for UK firms operating in international markets.

New Data Fields for Granularity

The FCA is exploring additional data fields, such as those to differentiate between retail and professional clients, to enable more targeted regulatory oversight.

Another significant proposal involves collecting detailed personal information about decision-makers, such as names and birth dates, to strengthen accountability and improve investigations into market abuse.  However, this raises privacy concerns and could impose extra compliance challenges, particularly under data protection laws like the UK GDPR.

Improving Transparency and Accessibility

The FCA also emphasises improving the structure and storage of reported data to make it more accessible for regulators.  By adopting more efficient formats, the FCA aims to enhance its analytical capabilities while maintaining accountability for firms.

Implications for MiFID II Compliance

While the FCA aims to modernise transaction reporting, the proposals come with potential costs and challenges for firms. Upgrading IT systems and adjusting processes to accommodate new data fields and reporting requirements will require substantial investment.

The proposed changes also risk widening the regulatory divergence between the UK and the EU.  With the EU advancing its own updates to MiFID II transaction reporting requirements, firms operating in both jurisdictions may face dual compliance obligations which are not well aligned, increasing operational complexity and costs.

The FCA’s push for “simplification” may complicate efforts for pan-European firms seeking a harmonised approach to transaction reporting.

Feedback Timeline for DP24/2: Have Your Say

The FCA is inviting feedback on DP24/2 until February 14, 2025, with a consultation on firm proposals expected later in the year. These discussions will shape the future of transaction reporting in the UK and likely lead to updates to the FCA Handbook, potentially replacing the current RTS 22 regulations.

For firms, this is an opportunity to influence the development of a balanced framework that addresses both regulatory needs and operational challenges. The stakes are high, as these changes could set the tone for UK-EU financial regulatory relations and the broader landscape of global market oversight.

As the FCA progresses toward a uniquely tailored regime, active engagement from stakeholders will be critical to ensure that the new framework strikes the right balance between innovation, efficiency, and compliance.

Adapting to Future MiFID II Transaction Reporting Requirements

As firms anticipate changes to MiFID II transaction reporting, as proposed in FCA’s DP24/2, it is crucial to take a proactive approach and focus on strengthening technology systems to adapt seamlessly to new requirements. Collaborating with trusted vendors, such as Approved Reporting Mechanisms (ARMs), can help ensure compliance readiness while reducing operational burdens. By proactively addressing these areas, firms can navigate the evolving regulatory landscape with confidence and efficiency.