On 16 December 2025, the Financial Conduct Authority (FCA) published an Engagement Paper on market risk capital requirements for FCA investment firms.

The UK Government took up the idea of formally reviewing the market risk capital requirements for specialised investment firms as part of its Financial Services Growth and Competitiveness Strategy published in July 2025. This FCA Engagement Paper introduces that review.

The FCA’s review aims to consider how different approaches to setting market risk capital requirements in the pursuit of market integrity could encourage wholesale trading, improve market liquidity, and in turn reduce barriers to entry for specialised trading firms. It will focus primarily on the current requirements in the Prudential sourcebook for MiFID Investment Firms (MIFIDPRU) sections 4.11 (trading book and dealing on own account: general provisions), 4.12 (K-NPR requirement) and 4.13 (K-CMG requirement), as well as the corresponding sections of the UK Capital Requirements Regulation as it stood on 31 December 2021. The FCA may also consider consequential changes to other parts of MIFIDPRU that support market risk, such as the definition of the trading book or calculating capital for concentration risk under MIFIDPRU 5.

In the Engagement Paper the FCA discusses certain important overriding issues where it may need to strike a balance when designing any new rules for market risk. For example, regulatory capital is not the only tool that gives protection against trading losses. The FCA then identifies a range of possible approaches on which it seeks stakeholder views, to help it narrow down the options for more detailed consideration.

Next steps

The deadline for comments on the Engagement Paper is 10 February 2026.

The FCA plans to publish a Consultation Paper on its review in 2026.