Horizon scanning: Ten regulatory topics to look out for in 2024

1. Edinburgh Reforms

The Edinburgh Reforms (ERs), published in December 2022, set out a package of wide-ranging regulatory reforms aimed at creating a more tailored UK framework for financial services post-Brexit. With the Financial Services and Markets Act 2023 (FSMA 2023) having received Royal Assent this summer, the Government – and in turn the regulators – are now able to progress many of the ERs initiatives. As well as various papers from the Government, we have already seen the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) engaging with the industry on various new and revised rules and guidance to implement the parts of the ERs that they will be responsible for.

In 2024, we can expect to see responses from the Government to their papers on various ERs topics, including ringfencing – HM Treasury’s consultation on secondary legislation to implement near-term reforms closed on 26 November 2023 and a policy paper and proposals for further reform on aligning ringfencing and resolution regimes are expected in H1 2024. From the FCA, there are likely to be one or more consultations on the new regime for public offers and admissions to trading following its engagement with the industry this year, and draft rules are expected to be published (possibly during H1 2024) following the recommendations of the Investment Research Review. The PRA is due to publish the outcome of its consultation on ringfenced bodies (managing risks from third country subsidiaries and branches), which closed on 27 November 2023, and consultation responses and policy statements are due from both the PRA and FCA on their respective securitisation rules by Q2 2024.

We are also likely to see the new designated activities regime (DAR), introduced by FSMA 2023, being used to facilitate some of these reforms. HM Treasury has already indicated in draft secondary legislation that it will use the DAR for the new securitisation, prospectus, and retail disclosure regimes, and this is likely to be confirmed in 2024 as that legislation is finalised. 

2. Brexit, smarter regulatory framework

2023 saw a couple of important developments including the first EU-UK Financial Regulatory Forum being held in London on 19 October 2023. The forum was established following the signing of the UK-EU Memorandum of Understanding on Financial Services Cooperation on 27 June 2023 and was seen as something which suggested EU/UK relations were thawing. The next Regulatory Forum meeting is scheduled for Spring 2024. However, despite the apparent change in mood music it seems unlikely that the EU will grant the UK positive equivalence determinations anytime soon. What may be on the cards is further regulatory divergence as the UK puts into action its plan to replace retained EU law with FCA and PRA rules as set out in the HM Treasury July 2023 Policy Paper ‘Building a Smarter Financial Services Regulatory Framework for the UK: HM Treasury’s Plan for Delivery’.

The location of euro derivatives clearing has been a key issue following Brexit and looks set to be a major talking point in 2024. In November 2023, the European Parliament's Economic Affairs committee voted to approve draft EU legislation that requires EU banks and asset managers to have an "active account" with an EU-based clearing house. The committee said that due to the "novelty of the requirement", requiring a specific portion of trades to be cleared through the account, it should only be "phased in gradually". The European Parliament is beginning negotiations with EU Member States before Christmas, and it is currently expected that the text will be finalised before the European Parliament elections next year.

3. Retail, wealth and personal finance

The FCA’s new regulatory ‘gateway’ for firms that approve financial promotions, which the Government legislated for in FSMA 2023, comes into force on 7 February 2024. Authorised firms wishing to continue to approve financial promotions from that date onwards will need to submit an application for approver permission to the FCA during the initial application window, which opened on 6 November 2023 and closes on 6 February 2024. This is a key deadline, as any firms that have not applied to the gateway by the time that window closes will no longer be able to approve financial promotions (unless an exemption applies or until they have applied for and been granted permission to approve). There are also other reforms on the horizon for the financial promotions regime, including changes to the exemptions for high-net-worth individuals and sophisticated investors which the Government plans to bring into force on 31 January 2024. 

Another key date for 2024 is 31 July 2024, when the FCA’s Consumer Duty – which came into force on 31 July 2023 for new products and services – will start to apply for closed products and services. As well as preparing for the closed products implementation deadline, the FCA has said that firms should also be ensuring that they are (and can demonstrate to the FCA that they are) delivering good consumer outcomes in relation to those products for which the Duty has already begun to apply, including through their implementation plans, data and monitoring, and internal assessments. 

On 20 March 2024, the recent FCA consultation proposing new measures for personal investment firms (PIFs) to set aside capital for potential redress liabilities at an early stage (CP23/24) closes. The proposed changes are due to the FCA’s concerns that some PIFs are causing consumers harm, with significant redress liabilities falling to the Financial Services Compensation Scheme. The FCA also published a Dear CEO letter alongside CP23/24, reminding firms they must not seek to avoid potential redress liabilities. A policy statement to CP23/24 is expected in H2 2024 with the rules coming into force in H1 2025.

Further work on the UK Retail Disclosure Framework is expected in 2024. In November 2023, HM Treasury issued a near-final draft statutory instrument and policy note for the UK Retail Disclosure Framework which is intended to replace the onshored Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new UK retail disclosure framework for consumer composite investments (CCIs) set out in FCA rules. The Government will also bring Undertakings for the Collective Investment in Transferable Securities (UCITS) – which are currently exempted from producing the PRIIPs key information document – into scope of the new UK regime. This will ensure disclosure is aligned across similar products, enabling retail investors to make well-informed decisions. The FCA will be publishing a consultation paper on the new regime sometime in 2024.

Significant change is also on the horizon for the legal and regulatory regime around consumer finance.

For instance, a year ago, HM Treasury issued a public consultation on the reform of the Consumer Credit Act 1974 (CCA) which was subsequently followed by a response document in the summer noting that overall the industry was supportive of reforming the CCA. Together with the earlier consultation the response document represented the Government’s first stage of an ‘ambitious overhaul’ of the CCA. The Government plans to develop proposals that move the majority of the CCA into the Financial Services and Markets Act 2000 model. This will involve repealing much of the CCA and recasting it in the FCA Handbook. However, the Government recognises that there may be specific aspects of consumer credit regulation that may warrant legislative-based provisions. During H2 2024 the Government plans to move to the second stage by producing more detailed proposals and informing these will be further stakeholder engagement through bilateral meetings and broader roundtables. This will help to inform the overall design of the new regime, and in particular the Government is keen to take time to engage widely on cross cutting issues – such as the degree to which regulation should be outcomes based, an approach to sanctions, and the extent to which provisions should be removed from legislation – to develop a clear articulation of the desired end state for consumer credit regulation.

Also, in 2024 we expect to see the FCA follow up on its consultation which seeks to update the Handbook to reflect the planned withdrawal of the Tailored Support Guidance (TSG). In May 2023, the FCA published a consultation paper (CP23/13) setting out how the FCA is planning to incorporate aspects of the TSG into its Consumer Credit (CONC) and Mortgages and Home Finance: Conduct of Business (MCOB) sourcebook and withdraw the TSG. The FCA also proposed targeted additional changes to support consumers in financial difficulty. The consultation closed in July 2023. The FCA expects new rules to come into force in H1 2024 and proposes to withdraw the TSG at the same time.

As for buy now pay later (BNPL), in February 2023 we saw a second HM Treasury consultation paper with draft legislation. In the consultation paper the Government provided its view that the scope of regulation should be limited to agreements that are offered by third-party lenders. This covers what are known as A60F(2) agreements where they are provided by a third-party lender (unless a specific exemption applies), by amending article 60F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. The Government also proposed a temporary permissions regime which will allow firms to transfer into the new regulatory regime before seeking full FCA authorisation at a future date. The consultation closed in April 2023. A consultation response setting out next steps is expected. Secondary legislation to bring BNPL into the regulatory perimeter will be laid when Parliamentary time allows.

From a contentious perspective, we anticipate the treatment of retail customers continuing to be an enforcement focus for the FCA going into 2024, in particular the treatment of consumers in vulnerable circumstances who face the greatest risk of harm. In line with this, we’ve seen the FCA becoming increasingly exercised around financial promotions and, given the significant increase in notoriety of ‘finfluencers’ and the potential for consumer harm taking place online, we expect to see more interventions regarding financial promotions by the FCA going forward. With regards to the Consumer Duty, in a November 2023 speech the FCA stated that an early area of focus for it will be to look at firms’ complaints and that, where it discovers problems, whilst it will prioritise the most serious breaches, we should expect the FCA to take robust action, such as interventions or disciplinary sanctions where needed. 

4. ESG

The end of November 2023 saw the FCA publish its long-awaited policy statement (PS23/16) containing final rules and guidance on sustainability disclosure requirements (SDR) and investment labels. The FCA has opted for a staggered approach to implementing its new rules and these include the anti-greenwashing rule which applies to all FCA regulated firms coming into force on 31 May 2024. 2024 then sees further milestones in the sense that on 31 July 2024 firms can begin to use labels, with accompanying disclosures and the naming and marketing rules apply from 2 December 2024. However, it’s important to note that the policy statement marks the beginning rather than the end of the FCA’s work on SDR. For instance, in early 2024 it will issue a consultation regarding the approach it will take regarding labels, disclosures and naming and marketing rules to UK portfolio management. We also expect to see further activity from HM Treasury with regards to extending the SDR regime to overseas funds. The FCA will also be looking at other areas including pension and other investment products and will be considering updating product-level disclosures requirements once the UK Green Taxonomy is in use, and product and entity-level disclosure requirements in line with future International Sustainability Standards Board (ISSB) standards.

As regards the ISSB standards, the FCA is expected to issue in 2024 a consultation paper on updating its TCFD-aligned disclosure rules for listed companies to refer to the UK-endorsed ISSB standards. The FCA expects to consult in 2024 on proposals to implement disclosure rules referencing IFRS S1 and IFRS S2 for listed companies. The FCA will take into account inputs to the Government’s endorsement process. The FCA will also consult on an appropriate scope and design for the new regime. At the same time as consulting on the policy approach in relation to the ISSB standards, the FCA will consult on expectations for listed companies’ transition plan disclosures.

And finally, on the advisory side on ESG, the FCA and PRA are expected to publish policy statements in H2 2024 which follow up on their earlier consultation papers on diversity and inclusion in financial services. 

In terms of contentious ESG developments, we’re starting to see regulatory cases in this area (see here) and note that regulators are motivated to take action in relation to greenwashing - there are a number of regulators active in this space, including not only the financial services regulators, but also the Advertising Standards Authority, the Competition and Markets Authority and the Financial Reporting Council. During next year we also expect to see further third party challenges of firms in relation to climate-related disclosures. 

More broadly, regulators see good governance as fundamental to a healthy culture and have demonstrated that they are prepared to use supervisory tools, investigate and take enforcement action in the event of risk management, cultural and governance failings (the PRA issued its highest fine to date in this area in 2023).  Further regulatory action with a view to driving higher standards is likely to follow in 2024.     

5. Financial crime

Reducing financial crime has remained a key priority for the UK regulators this year and we expect this to continue going into 2024 – with a focus on preventing fraud, money laundering and sanction evasion and terrorist financing, as well as delivering assertive action on market abuse. 

Fraud now accounts for approximately 40% of all crime and earlier this year, the Economic Crime Plan 2 and the National Fraud Strategy were published, which direct public-private focus to agreed priorities to tackling economic crime. Both of these emphasise an ambition to cut fraud levels. On 26 October 2023, the Economic Crime and Corporate Transparency Act (ECCTA) received Royal Assent which introduces, amongst other things, a new corporate offence of failing to prevent fraud for in-scope large firms. We expect this offence to come in during next year and there are steps that relevant firms can be taking now to prepare for this. Other changes brought in by the ECCTA include reforming the test for corporate criminal liability and reforms to the role of the UK companies registry, Companies House. A particular priority area for the FCA with regards to fraud has been authorised push payment (APP) fraud and in November the FCA published the key findings from its review of how firms mitigate the risks of APP fraud and fraud attacks more broadly, which includes examples of good practice and areas for improvement.

Money laundering continues to evolve, with criminals exploiting new technologies. To assist in combatting this, since the start of September 2023, cryptoasset businesses in the UK have been required to collect, verify and share information about cryptoasset transfers, known as the ‘Travel Rule’.  Another area of focus for the FCA with regards to money laundering has been disrupting money mule activity and, in October 2023, the FCA shared the key findings from its review of payment account providers’ systems and controls against mule activity, emphasising that firms should have a proportionate and risk-based approach to help make sure their platforms are not being exploited. 

There continues to be a focus on anti-money laundering (AML) systems and controls, including KYC procedures, and in September 2023, the FCA set out the issues it would consider as part of a review of the treatment of domestic Politically Exposed Persons (PEPs) by financial services firms. The review will report by the end of June 2024 and the FCA has said that it will take prompt action if any significant deficiencies are identified in the arrangements of any firm assessed. There have been a number of AML systems and controls enforcement cases this year (for example, see here) and we expect to see this continue in 2024. In terms of other AML developments on the horizon, the Criminal Justice Bill was introduced in the House of Commons in November 2023. The proposed Bill covers a range of activities, with its purpose to “keep communities safe” and it, amongst other things, with regards to AML reforms the confiscation regime in England and Wales in Part 2 of the Proceeds of Crime Act 2002 and creates a Suspended Accounts Scheme.

With regards to sanctions, the unprecedented scale of sanctions imposed by the UK Government and international partners since Russia’s invasion of Ukraine has further increased the FCA’s focus on firms’ sanctions systems and controls and, in light of this, the FCA engaged in a substantial programme of work assessing the systems and controls relating to sanctions compliance for over 90 firms across a range of sectors. In September 2023, the FCA set out the key findings from this assessment, identifying examples of both good practice and areas for improvement. In other developments in this area, earlier this month the government announced a new unit to clamp down on companies evading sanctions - the Office of Trade Sanctions Implementation. The unit will increase power to issue penalties for trade sanctions breaches and refer cases for criminal enforcement to HMRC. 

Finally, the FCA has maintained its ongoing focus on preventing, detecting and punishing market abuse, with enforcement in this area this year, including in connection with market manipulation (see here) and insider dealing. We anticipate this continuing to be a focus next year. 

6. M&A - authorisations, change in control, short selling

In terms of authorisations, there was not too much to report in 2023. In the summer, the FCA published new and updated webpages relating to aspects of the authorisation process. The latest authorisations operating service metrics 2023/24 showed that 96.8% of applications across all metric areas were determined within the statutory deadline. However, one noticeable area which was red concerned certain payment services and e-money authorisations and it will be interesting to see if this improves as we go through 2024.

One consultation that may have gone under firms’ radars this year were the consultations that the PRA and FCA issued in November 2023 on prudential assessment of acquisitions and increases in control. Essentially, the regulators are looking to replace the European Supervisory Authorities non-binding guidelines for the prudential assessment of acquisitions of a qualifying holding (known as the 3L3 Guidelines) with a new PRA supervisory statement and FCA guidance. As consulted on, the proposed new supervisory statement and FCA guidance would largely replicate the 3L3 Guidelines but there would be some re-phrasing, simplification, and changes to reflect the FSMA 2023. The deadline for comments on both consultation papers is 23 February 2024.

Another item that firms may have missed was the publication of The Short Selling (Notification Threshold) Regulations 2023. These Regulations amend the onshored EU Regulation on short selling and certain aspects of credit default swaps, commonly known as the Short Selling Regulation. It increases the notification threshold for the reporting of net short positions to the FCA from 0.1% to 0.2% of total issued share capital. This change is intended to reduce regulatory burdens on industry, while still ensuring that the FCA has sufficient data to carry out its functions. The Regulations come into force on 5 February 2024.

The Government intends to remove the UK version of the Short Selling Regulation (UK SSR) as part of the ERs mentioned above. A draft statutory instrument, the Short Selling Regulations 2024, was published at the end of November 2023. These draft Regulations implement the changes that the Government set out in its response to a Call for Evidence that was published during the summer and the Government response to the Short Selling Regulation Consultation – sovereign debt and credit default swaps, published in November 2023. The deadline for comments on the draft Regulations is 10 January 2024 and it is expected to be finalised during 2024. Significantly, the draft Regulations provide for some important changes. For instance, the scope of financial instruments covered by the draft Regulations is different to the UK SSR and it does not include restrictions on uncovered short selling of sovereign debt and credit default swaps (CDS), as well as sovereign debt notification requirements. Once the new regime comes into force, there will no longer be restrictions on uncovered short selling of sovereign debt and CDS or notification requirements related to short sales of sovereign debt. The draft Regulations do, however, have emergency intervention powers for sovereign debt and CDS in the same way as other financial instruments.

7. Prudential

In terms of the implementation of Basel 3.1, the PRA confirmed earlier this year that the implementation date would be delayed by six months to 1 July 2025. The transitional period was also reduced to 4.5 years to ensure full implementation by 1 January 2030. The PRA’s proposals for rules covering Basel 3.1 that are yet to be implemented in the UK were set out in a consultation paper published in November 2022 (CP16/22). To allow appropriate time to fully consider the responses to the credit risk and output floor proposals in CP16/22 without delaying publication of rules on the other parts of the package, the PRA intends to split the publication of its near-final Basel 3.1 policy statements into two:

• In Q4 2023, it plans to publish the near-final policies on market risk, credit valuation adjustment risk, counterparty credit risk and operational risk.
• In Q2 2024, it intends to publish near-final policies on the remaining elements from CP16/22: credit risk, the output floor, and reporting and disclosure requirements.

In terms of the first bullet the PRA published on 12 December 2023, the near-final policy statements. The policy statements are near final at this stage as HM Treasury will first need to revoke the relevant parts of the Capital Requirements Regulation by way of statutory instrument before the PRA can replace them with rules. Once the statutory instrument has been made, the PRA intends to make all the final policy materials, rules, and technical standards in a single, final policy statement. The PRA has stated in the policy statement that it does not intend to change the policy set out in the near-final rules or make substantive amendments.

The PRA has also been working on a ‘strong and simple’ framework for non-systemic banks and building societies. In December 2023, the PRA published a policy statement (PS15/23) on the scope criteria, liquidity and disclosure requirements for the regime and has renamed ‘simpler-regime firms’ to ‘small domestic deposit takers’ or SDDTs, and ‘simpler-regime consolidation entities’ to ‘SDDT consolidation entities’. The rules in the policy statement come into force either in 1 January 2024 or 1 July 2024. There will be more to come on the regime in 2024 including PRA consultations on liquidity, disclosures, and capital requirements for SDDTs and SDDT consolidation entities.

From an Investment Firm Prudential Regime (IFPR) perspective, late 2023 saw two interesting FCA papers, a final report on IFPR implementation observations and the latest IFPR newsletter. Both documents were intended to help firms meet the IFPR requirements and noted certain areas for improvement. Investment firms would be wise to take on board these observations in 2024. Also, the Regulatory Initiatives Grid notes that between April to June 2024 there will be a consultation paper covering ESG disclosures and MIFIDPRU clarifications.

8. FinTech – crypto, AI, operational resilience/ third party providers

HM Treasury published its final proposals on the UK’s future financial services regulatory regime for cryptoassets in October 2023, closely followed by the publication of FCA and Bank of England (BoE) discussion papers on their proposed rules to implement phase 1 of the regime (for fiat-backed stablecoins). While HM Treasury has now confirmed that cryptoassets are to become regulated in an expansive way, the draft secondary legislation is yet to be published (expected in 2024) and much of the detail will be set out in the regulators’ rules, which will need to be consulted on in due course, so there is still a considerable way to go before the industry can really start to plan for the new regime. Follow-on consultation papers from the FCA and BoE on the stablecoins regime are expected around H2 2024. On the contentious side, we’ve seen the FCA focussing its enforcement efforts in this area this year on unregistered crypto ATMs. A crypto ATM is a kiosk that allow a person to purchase Bitcoin and other cryptocurrencies by using cash or debit card. They are deemed a cryptoasset exchange provider and must be registered with the FCA and comply with the Money Laundering Regulations.

Artificial intelligence (AI) has also been a hot topic in 2023, with a Government White Paper in August setting out a new approach to regulating AI aimed at facilitating the safe and innovative use of AI in industries including financial services, and a joint BoE, PRA and FCA feedback statement (FS2/23) in October providing a summary of responses to their discussion paper on AI and machine learning. Although the regulators did not in FS2/23 provide any policy proposals or signal how they are considering clarifying, designing and/or implementing current or future regulatory proposals on this topic, we can expect to see further industry engagement on the topic in 2024.

Another area to watch is operational resilience. Since the FCA’s new operational resilience regime entered into force in March 2022, in-scope firms should have been carrying out their mapping and testing exercises as they have until 31 March 2025 at the latest to show they can remain within their impact tolerances for each of their important business services. And in December 2023, the FCA, PRA and BoE launched a joint consultation (PRA CP26/23 and FCA CP23/30) on operational resilience and critical third parties (CTPs) to the UK financial sector, which sets out the regulators’ proposed requirements and expectations for CTPs. The consultation closes on 15 March 2024, and further consultations are expected from the regulators in due course on their oversight of, and use of disciplinary measures over, CTPs. From a contentious perspective, we have seen enforcement this year in connection with outsourcing (see here) and cybersecurity arrangements (see here) and we expect these areas, and operational resilience more broadly, to continue to be a focus for enforcement in 2024.

And finally, in November 2023 HM Treasury published its response to its earlier consultation on a proposed approach to delivering a Digital Securities Sandbox (DSS) noting that it intends to largely retain the approach it consulted on. The DSS is the first financial market infrastructure sandbox to be established under powers granted by the FSMA 2023. Just before Christmas the statutory instrument setting up the DSS was laid before Parliament, The Financial Services and Markets Act 2023 (Digital Securities Sandbox) Regulations 2023. Expect to hear more on the DSS in 2024!

9. Asset management

Following engagement with the industry on its discussion paper (DP23/2) earlier this year, the FCA confirmed its priorities for updating and improving the UK regime for asset management in a speech in October 2023. One of its three main priorities for reform in this area is to make the regime for alternative fund managers more proportionate, including through changes to the existing UK regime that implemented the Alternative Investment Fund Managers Directive (AIFMD) – it plans to consult on some of these changes during 2024. Another priority, also on the list for consultation in 2024, is updating the regime for retail funds by re-evaluating the AIFMD rules for non-UCITS funds. Its third priority is to support technological innovation, including through work on fund tokenisation, and with a blueprint for fund tokenisation having been published by the Technology Working Group (with involvement from the FCA) in November 2023, there may be more to come on this topic in 2024.   

The FCA also published a consultation paper (CP23/26) in December 2023 on implementing the Overseas Funds Regime (OFR). Although HM Treasury has not yet made an equivalence determination in relation to any jurisdictions, the FCA is consulting now on its rules and guidance to integrate the regime into its Handbook and enable overseas funds to be recognised, so that it and firms have enough time to prepare for the necessary changes. The consultation closes on 12 February 2024 and the FCA is aiming to publish a final policy statement and final Handbook rules in H1 2024.

A final area to watch in the asset management space is Money Market Funds (MMFs). In December 2023, HM Treasury published a near-final version of a draft statutory instrument, the Money Market Funds Regulations 2024, which will replace the onshored MMF Regulation and create a new framework for MMFs. Alongside the draft instrument, the FCA launched a consultation (CP23/28) on updating the regime for MMFs, setting out proposals aimed at enhancing the resilience of UK-based MMFs. The consultation is open until 8 March 2024. 

10. Markets

Work continues on the Wholesale Markets Review and as part of this, in early December 2023, the FCA published its consultation paper (CP23/27) on reforming the commodity derivatives regulatory framework, which included proposals on position limits, the exemptions from those limits, position management controls, the reporting regime and the ancillary activities test. The consultation is open until 16 February 2024, after which the FCA will consider responses and make the necessary changes to the Handbook – although firms can expect a transitional period of a year from the date the relevant statutory instruments are made before the regime comes into force.

In late December 2023 the FCA published two further consultations linked to the Wholesale Markets Review. A consultation on improving transparency for bond and derivatives markets (CP23/32) seeks to deal with the criticism that the current transparency regime for bond and derivatives markets has not delivered meaningful transparency and has had a limited impact on price formation while imposing a high cost to industry. A consultation on payments to data providers and DRSP forms included a policy statement for the framework for a UK consolidated tape (CT). The FCA expects a bond CT provider to commence operation in the second half of 2025. It also expects to finalise changes to the transparency regime in 2024 with the changes applying in 2025 before the CT provider goes live.

Another issue to keep an eye out for concerns the new intermittent trading venue (ITV) that will improve private companies access to capital markets before they publicly list. The ITV was announced by the Chancellor in his July 2023 Mansion House speech who promised to get an ITV sandbox up and running before the end of 2024. HM Treasury and the FCA are expected to lead the ITV sandbox initiative, with engagement planned in Q2 2024.

In the derivatives space more broadly, the Government plans to repeal and replace the UK versions of the European Market Infrastructure Regulation (UK EMIR) and the Central Securities Depositories Regulation (UK CSDR) under powers granted by FSMA 2023. With the BoE having been granted a general rule-making power over central counterparties (CCPs) and central securities depositories (CSDs) by FSMA 2023 so that it can take on primary responsibility for setting regulatory requirements for these entities, there is likely to be further engagement with the industry on the development of these regimes during 2024.

HM Treasury is considering using the new DAR, mentioned in the ERs section above, to establish new designated activities relating to derivatives. It has indicated, in Schedule 6B of FSMA 2023, that activities related to entering into derivative contracts (including those contracts not cleared by a central counterparty) and holding positions in commodity derivatives may be designated. So far, HM Treasury has not published any draft legislation relating to these designated activities but this may be one to watch out for in 2024.

Finally, the new FCA and BoE rules on derivatives reporting requirements under UK EMIR (as set out in PS23/2 in February 2023) will come into effect on 30 September 2024. The FCA also noted in PS23/2 that it would consult on draft supporting guidance, providing further clarity on how the rules are to be implemented – we are still awaiting that consultation.