ESMA Data Quality Report 2023: What does it say about MiFIR?

ESMA published its 2023 Report on the Quality and Use of Data earlier this month. In this blog, we focus on the MiFIR elements of the report. 

In June 2023, ESMA updated its data strategy defining how data will be used to support its objectives and reiterated that data plays a critical role in the day-to-day processes of NCAs, central banks (such as the European Central Bank (ECB)) and ESMA. Data is used extensively allowing financial regulators to fulfil their obligations under their key mandates to maintain financial stability, orderly markets, and market integrity.

How ESMA is using ARM and APA data

In the context of supervision of data reporting service providers (DRSPs), ESMA notes in the report that it uses metrics relating to the timeliness, completeness, availability and integrity of data received by approved reporting mechanisms (ARMs) and approved publication arrangements (APAs). It draws attention to the fact that the number of files rejected by ARMs has fallen significantly, suggesting better quality of data. ESMA conducted a comparison of transactions reported to ARMs with those published by APAs, evidencing issues around APA data access and aggregation, which triggered follow-up actions from a supervisory and policy perspective. ARM transaction data was also used to detect and investigate one case of significant overreporting relevant for the MiFIR transparency calculations. 

ESMA notes that the observations drawn from its analysis lead to new validation rules, enhancements of test methodologies and guidance in the definition of reporting fields. In the report, it publishes a list of publicly available reports detailing how regulatory reporting data has been used to support the analysis. It uses examples such as the evolution of EEA share market structure since MiFID II published in October 2023, and a study by the AMF in France that used MiFIR data to analyse the profiles of individuals conducting retail investor activity.

Comparison between transaction and transparency data

The report also details that ESMA assessed the consistency between transaction data reported by ARMs and transparency data published by APAs. It found that reports common to both datasets exhibit a reasonable level of price consistency, whilst the use of machine learning (clustering) allowed the identification of misreporting patterns which have been notified to reporting entities. One result of the comparison between transparency and transaction data allowed ESMA to identify an incorrect reporting practice used by multiple organised trading facilities, leading to duplication in the transparency system.

As per last years’ report, it is clear that data remains a priority for ESMA and with that, data accuracy. Regulators are clearly using the data to support their statutory objectives and outliers in the data will be identified, action taken and importantly for firms, data quality issues will be raised with the reporting firms themselves.

• Read the ‘2023 Report on the Quality and Use of Data’ in full on ESMA’s website.
• Read our blogs on the 2023 Data Quality Report on EMIR and SFTR.
• For a free heathcheck of your MiFIR reporting (transaction, post-trade transparency or RTS 23 instrument) please get in touch.