Unlocking the Financial Services and Markets Act 2025: What You Need to Know

The UK government is sharpening its tools to ensure a more transparent and orderly financial market. A recent legislative update, the Financial Services and Markets Act 2000 (Markets in Financial Instruments) (Amendment) Regulations 2025, is setting the stage for stronger oversight in the world of commodity derivatives. Here's a straightforward breakdown of what this means and why it matters.

What’s the Big Change?

The Financial Services and Markets Act 2023 has repealed certain laws related to financial services. Now, using powers from this Act, the new regulations are tweaking the 2017 rules to give the Financial Conduct Authority (FCA) more muscle, especially over commodity derivatives traded over-the-counter (OTC).

Why Does It Matter?

1. Spotlight on Transparency: Commodity markets, especially those trading OTC, often operate in the shadows. The bilateral nature of these trades means less transparency. The new regulations aim to shed light on these markets, ensuring that positions held are visible to regulators.

2. Learning from the Past: A review following the nickel market volatility in March 2022 highlighted risks in OTC markets. The lesson? There's a need for greater oversight to prevent future market disruptions.

3. Expanding FCA’s Powers: Previously, the FCA's reach was limited to derivatives classified as financial instruments. Now, they can demand more information and intervene across a broader range of trades, thanks to the updated definitions in the regulations.

What Was the Old Way?

Before this amendment, the FCA's oversight was restricted. Some OTC trades slipped through the cracks because they didn't fit the narrow definition of a financial instrument. The new rules expand this definition, bringing more trades under the FCA's watchful eye.

Consultation and Impact

The Treasury consulted with industry stakeholders to fine-tune the regulations. While no full-blown impact assessment was needed (the financial impact on businesses is minimal), the changes are designed to ensure the UK remains a competitive financial hub without compromising market integrity.

Looking Ahead

The new rules are set to kick in once certain sections of the FSMA 2023 are operational in 2026. The Treasury will keep tabs on their effectiveness through ongoing industry engagement.

In essence, these amendments are about striking a balance—empowering the FCA to maintain market order while keeping the UK's financial markets attractive on the global stage. Stay tuned for how these changes will play out in practice.