What is the difference between the UK and EU Transaction Costs calculation

This is a common question that many hesitate to ask. Here’s a simple breakdown:

EU Transaction Costs: Here the overall value of the transaction cost is floored at the level of the explicit transaction cost. Negative implicit transaction costs, Anti-Dilution Levies (ADL) or Swing Proceeds can not bring the total transaction cost below the explicit cost. If explicit costs are zero, the total transaction costs disclosed will be at least zero as well and cannot be brought below zero.

UK Transaction Costs: If the explicit and implicit costs combined are positive, the ADL can be substracted but it cannot bring the total cost below zero. Hence in this case a floor of zero applies. However, if the explicit and implicit costs combined are already negative, no ADL can be further deducted and it cannot impact the total transaction cost to become more negative or further below zero. Please note that in the latter case, the total reported UK transaction cost can be negative. Note that the FCA released a new CCI proposal that will make the implicit transaction cost no longer required for UK Product Summary Documents.