On 17 July 2025, the Financial Conduct Authority (FCA) released an Explanatory Statement under Article 28a(9) of the UK Markets in Financial Instruments Regulation (UK MiFIR) relating to the FCA Direction on the Derivatives Trading Obligation (DTO).

Background

On 31 December 2024, the FCA issued a Direction under Article 28a of UK MiFIR to modify the UK DTO, replacing an expiring transitional Direction. The Direction allows firms subject to the UK DTO, trading with or on behalf of EU clients subject to the EU DTO, to execute those trades on EU trading venues – provided certain conditions are met. Such conditions include that firms must take reasonable steps to be satisfied the client does not have arrangements in place to execute the trade on a trading venue to which both the UK and the EU have granted equivalence.

Under Article 28a(9), the FCA must publish “as soon as reasonably practicable” after each 6-month period, a statement explaining why the conditions under Article 28(1)(a) and (b) continue to be met to extend for a further 6 months.

The Explanatory Statement now issued by the FCA therefore covers the 6-month period to 31 December 2025.

Explanatory Statement

In the Explanatory Statement the FCA states that in the absence of mutual equivalence between the UK and EU, maintaining the Direction is necessary to prevent or mitigate disruption for market participants caught by a conflict of law between the EU and UK DTOs – in particular, branches of EU firms in UK. The FCA also adds that the Direction directly supports its operational objectives as it prevents or mitigates disruption for market participants caught by a conflict of law between the EU and UK DTOs in the absence of mutual equivalence between the UK and EU.

Continuation of the Direction

The FCA confirms that the Direction will remain in effect for another 6-month period, after which it will issue another new statement if it is still in force.