FCA Handbook Notice 129

The UK Financial Conduct Authority (FCA) has published Handbook Notice 129 which sets out changes to the classes of derivatives subject to the derivatives trading obligation (DTO), following policy statement PS25/2 published in April (please see our update). The DTO requires certain financial and non-financial counterparties to trade specific standardised and liquid over-the-counter (OTC) derivatives on regulated trading venues or equivalent third-country venues. The FCA determines the classes of derivatives that are subject to the DTO. The FCA has decided to expand the classes of secured overnight financing rate overnight index swaps (SOFR OIS) to increase the benefits of on-venue trading. It also establishes a new framework to provide exemptions from the DTO for transactions arising from the use of post-trade risk reduction (PTRR) services. The PTRR services now expand beyond portfolio compression and exemptions have been extended so they are also not subject to best execution and trading venue authorisation obligations, in addition to the current DTO exemption. The changes are set out in the following draft instruments:

• Technical Standards (Markets in Financial Instruments Regulation) (Derivatives Trading Obligation and Transparency) (Amendment) Instrument 2025, amending Commission Delegated Regulation (EU) 2017/2417 with regards to regulatory technical standards on the trading obligation for certain derivatives.
• Markets in Financial Instruments Regulation (Post-trade Risk Reduction Services Rules) (Amendment) Instrument 2025, amending the glossary and GEN Sch 4 in the Handbook. It also introduces a new chapter MAR 12 containing the relevant rules.

Both instruments come into force on 30 June.