2016: The reporting (Jean) Genie is well and truly out of the bottle
David Bowie was many things to many people but a transaction reporting aficionado he was not. That said, in the year that saw the great man leave on his own “Space Oddity“, we use some of his most loved hits and lyrics to help us look back at reporting in 2016 …. and only hope he is not looking down to see us take such a liberty! David, we’re truly sorry…
The reporting “Labyrinth” – new obligations
Every year since the 2009 G20 Pittsburgh summit, which gave birth to the G20 reporting commitments, the industry has had to plan for and comply with new regulatory reporting obligations across the globe and 2016 has not been any different. Added to the “Labyrinth” of existing regulatory obligations, we have seen Canadian G20 reporting go live in July, the introduction of branch reporting in Hong Kong, and closer to home we have seen changes to EMIR reporting brought about by the introduction of clearing obligations. To cap the year off, firms will need their own “Heroes” working during the holiday season to make sure they can go live with Bank of Israel reporting on 1 January 2017!
In regulatory reporting that has only recently gone live, 2016 has seen “Changes” or consultations on changes to their obligations. In accordance with Article 85(1) EMIR, the European Commission launched a review of the legislation on 21 May 2015 and published its final report on 23 November 2016. As a result, the Commission has committed to a legislative review of EMIR in 2017 which will include an attempt to streamline trade reporting requirements. In the US, we have seen no action relief expirations for CFTC DFA (Dodd Frank Act) reporting and the advent of SEC reporting drawing closer. The election of Donald Trump aligned with a Republican majority in the US Congress could mean substantial changes with the repeal of certain sections of the DFA in 2017 a distinct possibility.
“Ashes to Ashes” for MiFID I transaction reporting
As transaction reporting under MiFID I enters its final year, throughout 2016 firms have found themselves “Under Pressure”, trying to prepare for the much more demanding and complex ask of MiFID II. Both buy side and sell side firms have been grappling with their understanding of the obligations imposed by MiFIR Article 26, the supporting RTS 22 and final guidelines. The final guidelines document published in October represents a substantial investment by ESMA and the competent authorities. Ana Fernandes of the FCA’s Transaction Monitoring Unit stood in public and compared the physical size of TRUP to the MiFIR guidelines. Her conclusion – they have invested significant time and effort in the drafting of the regulations and supporting guidelines and their expectations of the standard of reporting is higher than that of regimes that have recently gone live. Throughout 2016 firms have been busy digesting what is required of them to comply with MiFIR transaction reporting obligations, realising it is significantly more complex than either EMIR or DFA. In short, the significant increase in complexity of MiFIR reporting combined with the greater scrutiny of regulators means MiFIR could prove all-consuming for firms in 2017.
Data Quality? Everything is not “Hunky Dory”
As the year ended, the industry received messages both from the FCA and ESMA about the quality of the data that is being reported to them. Ana Fernandes and Olga Petrenko both struck the same chord at last month’s Transaction Reporting Conference at the BBA when they called out the poor quality of data still being reported. Ana outlined that reporting under MiFID I, now live for nine years, still has significant errors – something that we highlighted when we analysed transaction reporting fines earlier this year. Olga explained that ESMA is still receiving complaints from other bodies such as central banks about the quality of the data they are receiving from the reports made under EMIR. Consequently, ESMA will have the improvement of data quality as its primary objective of 2017. Both bodies are investing heavily to develop the capacity to identify data quality issues where they will increasingly compare reports, use independent sources of data, and introducing ‘business’ validations to identify errors and hold firms accountable in meeting their obligations.
If these years are to be the “Golden Years” of reporting and less a “labyrinth” of competing demands, then the industry needs to invest heavily in accurate advice and appropriate solutions throughout 2017 so the quality of the data they report meets the increasing expectations of the regulators.
There’s a lot to do as we head into 2017 but to soften the blow perhaps have a listen to Bowie over the festive season.
Thank you for your support in 2016 and we wish you a restful break with your friends and family.
Seasons greetings from us all at Kaizen.