The Financial Conduct Authority said it was the first case it had been involved with under the European Markets Infrastructure Regulation.
The global banking giant was fined £34,524,000 after finding it had not reported millions of trades in exchange traded derivatives made between February 2014 and February 2016 in line with new regulations.
As it agreed to settle at an early stage, the FCA knocked 30% of the final fine which would have otherwise have come in just under £50m.
Mark Steward, FCA executive director of enforcement and market oversight, said: “It is vital that reporting firms ensure their transaction reporting systems are tested as fit for purpose, adequately resourced and perform properly. There needs to be a line in the sand.
“We will continue to take appropriate action against any firm that fails to meet requirements.”
The reporting requirements came in as part of a drive for transparency following the 2008 global financial crash
The FCA applauded Merrill Lynch for being “open and co-operative” and taking quick action, but noted the bank had been linked to two earlier transaction reporting cases.
In a statement, Merrill Lynch said: “We are wholly committed to complying with all applicable regulatory requirements.
“When we discovered that certain trades had not been fully reported to a trade repository, as required following the introduction of EMIR, we immediately reported the matter to the FCA.
“We have re-evaluated and improved our related processes and can confirm that no clients were financially impacted as a result.”