The UK plays FX’s Indomitable Gauls

The FCA and the European Commission (EC) remain encamped on their respective positions regarding the reporting of FX forwards. The FCA resists EC’s view that FX forwards must be brought within the scope of EMIR reporting and central clearing obligations.

The FCA maintains that certain FX forwards fall outside the scope of EMIR, evading the reporting obligations which started on 12 February 2014 across EU.

Although as a regulation EMIR should apply in the same harmonised way in every Member State, a part of the definitions point to MiFID I, a directive. As such, EMIR imports the discretion that national regulators had under MiFID I to interpret these definitions. The FCA sticks to its long-standing position of interpreting derivatives under MiFID I as to exclude FX forwards, providing they are entered into for commercial purposes.

The EC argues that there is now a consensus among national regulators to include FX forwards within the scope of reporting obligation under EMIR.  At the same time, the FCA is aware that the application of MiFIR / MiFID II and its implementing measures on January 3 2017 is likely to deal a fatal blow to its position, but until then the motto is stand your ground until the sky is falling.

In order to force the FCA to retrench, the EC has suggested that ESMA might issue guidelines to harmonise reporting obligations until MiFIR / MiFID II reinforcement arrives.

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