On 2 December 2024, the Financial Conduct Authority (FCA) published an updated direction to modify the UK’s derivatives trading obligation (DTO), which is expiring.

Background

The DTO is a G20 commitment to improve over-the-counter derivatives markets, which the UK implemented through Article 28 of the UK Markets in Financial Instruments Regulation (MiFIR). Article 28 of MiFIR requires transactions in certain classes of derivatives to be concluded on regulated trading venues.

The new direction

The FCA is modifying the UK’s DTO using its new power of direction under Article 28a of UK MiFIR, which was given to it by the Financial Services and Markets Act 2023.

The direction will apply only to transactions in classes of derivatives that are subject to the DTO in both the UK and EU, to reflect changes to the scope of the UK and EU DTO following the transition from LIBOR to risk-free rates.

The FCA has also published a statement explaining the purpose of the new direction, including how it is intended to prevent or mitigate disruption to financial markets and advance the FCA’s operational objectives. 

Next steps

The new direction will apply from 11.01pm on 31 December 2024.