The UK Financial Conduct Authority ("FCA") fined Merrill Lynch International ("Merrill Lynch") £34,524,000 for reporting and oversight violations in relation to trades in exchange-traded derivatives ("ETD"). This was the first such enforcement action issued under the European Market Infrastructure Regulation ("EMIR").

According to the FCA, an uncorrected error in the Merrill Lynch ETD reporting system led to 68.5 million required reports on ETD transactions not being submitted between 2014 and 2016.

The fine issued by the FCA represents a 30% discount for settling at an early stage of the investigation. Without this discount, the fine would have been £49,320,000.

Commentary / Assia Damianova

By way of a summary of the rules: EMIR requires reporting of the transaction details for both exchange-traded derivatives and OTC derivatives. This obligation covers both financial and non-financial counterparties. All OTC derivative contracts and exchange-traded derivatives should be reported to one of the registered trade repositories, generally on a T+1 basis.

This fine is significant not only because of its size, but also for revealing the regulator's approach to EMIR reporting. Rather than looking for one-off cases, the FCA has shown that it will focus on systematic issues, such as whether a regulated institution has adequate oversight arrangements, as well as whether adequate resources for compliance are allocated.

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