And Then There Was One

The London Stock Exchange Group has announced that they are closing their SFTR trade repository (TR) with effect from 31 January 2022, the same day that new ESMA schemas and validation rules are due to be introduced.

Dwindling number of vendors

This development should perhaps not be any great surprise as SFTR services in general are gravitating towards a dwindling number of vendors. However, it may cause some concern at regulators, leaving a sole TR in the UK and effectively a duopoly in the EU too (with KDPW perhaps having most relevance only to the Polish market). UnaVista itself originally spawned from the UK FSA (now FCA) sale of their Transaction Reporting System (TRS) for securities transaction reporting, having subsequently expanded into the TR space. Could the FCA consider entering the fray again, to offer SFTR reporting parties an alternative and circumvent any monopolistic issues in future?

More accurate reporting?

A greater concentration of SFTR reports is not without benefit. Reconciliations become more centralised, with fewer if any inter-TR reconciliations necessary. It will also concentrate expertise and users in fewer places to work together to tackle reporting challenges and data quality. The FCA overseeing a single TR could also choose to be more pragmatic in addressing schema, validation rules and other reporting issues, to prioritise accurate, high quality reporting over the strict application of the rules governing a TR.

Tone from the top

In terms of what will benefit both the industry and regulators most, we continue to put the spotlight on measures to tackle data quality. In our opinion, this needs to come from the top, from regulators themselves. This includes a stronger partnership with industry in writing a far more comprehensive and watertight set of rules, standards and definitions to remove any room for ambiguity or controversy. This would be reinforced if reporting parties were encouraged to adopt regulatory testing and reconciliation to ensure continual improvement in the quality of their reporting.

How Kaizen can help

Firms who are required to migrate their activities from UnaVista to another TR, either in the EU or the UK may take this opportunity to go back to basics and thoroughly review their reporting scope and methodology, prior to onboarding at the new TR. Kaizen is uniquely placed to uncover all of the errors and questionable elements of your SFTR reporting to date, through our Accuracy Testing and Advanced Reconciliation services, enabling firms to start on a solid footing at the new TR.