Merrill Lynch Fined Nearly $50 Million By UK Regulator

Josh O'Neill

23 October 2017

The UK's financial services watchdog has fined £34.5 million ($45.5 million) for failing to report nearly 70 million exchange-traded derivative transactions over a two-year period.

Merrill Lynch received a 30 per cent discount in its overall fine for agreeing to settle at an early stage of the 's investigation, the regulator said in a statement. Without this discount, the fine would have been £49.3 million.

The fine marks the first time the FCA has taken enforcement action against a firm for failing to report details of exchange-traded derivatives trades, reflecting “the importance the FCA puts on this type of reporting,” it said.

"Effective market oversight depends on accurate and timely reporting of transactions,” Mark Steward, director of enforcement and market oversight at the FCA, said. “It is vital that reporting firms ensure their transaction reporting systems are tested as fit for purpose, adequately resourced and perform properly. There needs to be a line in the sand.”

Exchange-traded derivatives are financial instruments whose value is based, or derived, on the value of another asset. Like an exchange-traded fund (ETF), they are traded on regulated exchanges and are popular because they offer higher liquidity, no default risk, and can be used to hedge exposure or speculate on a range of financial assets.