UK Regulator Nixes Hedge Fund Plea for Lighter Data Rules

The Financial Conduct Authority (FCA) has decided against substantial reductions in transaction data reporting requirements, a move advocated by hedge funds. The regulator announced plans to streamline reporting rules, projecting annual savings exceeding £108 million for companies by modifying or eliminating certain requirements deemed disproportionate. This approach contrasts with hedge fund proposals to align UK rules with those in the US and Japan, which would remove reporting obligations for buy-side investors.

The FCA rejected the broader reforms, arguing that the UK's unique market structure, characterized by a high volume of transactions involving British buy-side firms and overseas sell-side institutions, necessitates its current oversight level. Eliminating buy-side reporting would significantly impair the FCA's and the Bank of England's ability to monitor corporate debt markets, impacting approximately 56 percent of transactions by buy-side firms.

While the FCA's proposed changes, including removing foreign exchange derivatives reporting and transactions in EU-only traded instruments, are seen as a step forward, industry groups expressed disappointment. They argue that the core burden of dual-sided transaction reporting remains, potentially hindering the UK's investment management industry's global competitiveness. The FCA also plans to reduce the error correction period from five to three years.