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UK markets watchdog says midweek Brexit a challenge

By Huw Jones

By Huw Jones

LONDON, Oct 11 (Reuters) - Britain's markets watchdog will take a "pragmatic" approach to financial firms that fail to report transactions on time if there is a no-deal Brexit on Oct. 31, it said on Friday, given the challenges of adapting to big changes midweek.

Following Thursday's meeting between the prime ministers of Ireland and Britain, hopes for a divorce settlement have increased.

The Financial Conduct Authority (FCA) set out guidance on Friday on what it will do if there is no deal by Brexit day, which is likely to roil investors and markets.

Britain's departure from the European Union is due to take place on a Thursday.

Typically banks and brokers need a weekend to adapt to such major changes that will affect IT systems used for mandatory reporting of stock, bond and derivatives trades to regulators.

"The FCA is aware that leaving the EU during the working week could pose operational challenges for firms," the watchdog said in a statement.

"The FCA will take a proportionate and pragmatic approach to supervising reporting around exit day."

A no-deal Brexit would split cross-border stock markets, and the FCA has yet to say how it would respond to this.

If there is a deal, it would be business as usual for Britain's financial sector during a transition period.

The FCA said firms that are not able to comply fully with securities reporting requirements around Brexit day will need to be able to back-report missing, incomplete or inaccurate transactions as soon as possible thereafter.

For derivatives trades, market participants should have all trades reported to a trade repository no later than Nov. 4.

It echoes comments from the Bank of England which said this week that banks and the broader financial system were well prepared for a disorderly Brexit.

The FCA said it had taken into account statements this week from the EU's European Securities and Markets Authority (ESMA), which said on Monday there was still a high level of uncertainty as to the final timing and conditions of Brexit.

Many banks, insurers and trading platforms in London have opened hubs in the bloc to ensure continued access for EU customers.

The EU's European Banking Authority (EBA) said this week that banks must guard against complacency and press ahead with building out their new EU operations.

"Notably, to ensure that assets, appropriate staff and data are in place to support relevant authorisations and that customers are adequately informed," EBA said. (Reporting by Huw Jones; Editing by Mark Potter)