Engagement Paper: Market risk capital requirements for FCA investment firms

Read the Engagement Paper[2]

Why we are engaging

We’re looking at how we can change our specific rules on market risk capital to make them more appropriate for investment firms. We want views on how different approaches could:

• Encourage wholesale trading.
• Improve market liquidity.
• Reduce barriers to entry for specialised trading firms.

Who this is for

Solo-regulated investment firms that:

• Have permission to deal in investments as principal in MiFID financial instruments.
• Manage a trading book as part of their regulated activities.

Next steps

Please send us comments by 10 February 2026.

Email [email protected] or write to: Prudential Policy, Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.

We aim to publish a consultation paper on our review in 2026.

Background

Our Investment Firms Prudential Regime sets specific prudential requirements for FCA investment firms. This includes market risk capital requirements, which govern how much capital firms must hold to cover potential losses from investments. However, these are based on the UK Capital Requirements Regulation, which was originally designed for banks.

The harm caused by an investment firm failing may be less than with a bank. This means we could set different capital requirements for these firms that better reflect the harm.

We’re reviewing our requirements and will consult on changes. This Engagement Paper sets out some of the things we’ll consider and approaches we could take. Your feedback will help us form our proposals ahead of consultation.