I think it’s worth reminding ourselves of some recent history now that ESMA has published its Final Report on the Call for Evidence on a Comprehensive Approach for the Simplification of Financial Transaction Reporting.

Almost two years have passed since ESMA published its Consultation Paper on the review of RTS 22 (Transaction Reporting) and RTS 24 (Order Record Keeping). At the time, it wasn’t exactly great news for firms: more regulation, more fields, significant implementation projects and higher BAU costs all looming. The legislation was drafted and the industry’s collective best guess was a go-live date of December 2026.

Fast forward just 21 months and the industry is now looking at a very different picture.

We have taken a detailed look at what the Final Report means for MiFIR transaction reporting and, perhaps more importantly, when it may start to matter in practice.

What ESMA says in the final report

In a nutshell, ESMA explains:

• Why it has taken action: duplication, fragmentation, and the cost of the existing reporting frameworks
• What it wants to achieve: simplification, not deregulation, while preserving the information necessary for effective supervision
• Why it believes change is justified: a detailed cost-benefit analysis of the current reporting landscape
• Its policy recommendation: short-term simplification measures alongside a longer-term ambition of a single integrated transaction reporting framework
• What happens next: discussions with the EU institutions to secure the legislative timetable (maybe easier said than done), alongside further analysis to “advance the target scenario“.

What the report doesn’t propose

ESMA also reminds us that the report doesn’t propose:

• a reduction in regulatory oversight
• less market surveillance.

So, rest on our laurels? Probably not advisable. While we wait for the legislative bus to arrive, depart and eventually take us to regulatory reporting utopia, NCAs will continue to monitor firms, challenge reported data and expect remediation under today’s existing rulebooks.

What needs to happen before a long-term framework is possible

What happens next?

For the long-term single reporting framework, significant Level 1 legislative change will be required across all three regimes in order to:

• establish a “report once” framework
• rationalise reporting channels and remove duplication
• clearly allocate responsibilities between ESMA and NCAs
• permit phased integration
• introduce integrated reporting templates.

For the fully integrated reporting model, ESMA says it could be operational within five years.

However there is also a medium/short term workstream. ESMA refers to this as “a defined list of independent intermediate simplification measures aimed at reducing the burden in the short to medium term.”

MiFIR: what could change sooner?

I’m a MiFIR man – you can’t teach an old dog new tricks – so I will concentrate here on the potential impact for RTS 22 and RTS 23.

Unfortunately ESMA has stopped short of removing Securities Financing Transactions and FX transactions from MiFIR. Cue howls of disappointment reminiscent of those heard in 1966 when Geoff Hurst’s third goal was allowed. (See past editions of “It’s Coming Home”; 1970, 1974, 1982, 1986…).

As for measures requiring Level 1 legislation, there are currently none that directly impact MiFIR. I’ll happily leave those to my colleagues in the derivatives and securities financing space, but these changes are not imminent.

For MiFIR RTS 22, however, the more interesting developments sit within the Level 2/Level 3 space. Three areas could attract attention sooner rather than later:

• reducing the back-reporting horizon for historical corrections from five years to three years
• targeted exemptions from RTS 22(5), removing certain transaction types from the reporting obligation
• deprioritising a limited number of RTS 22 and RTS 23 fields by making them optional.

The obvious question is whether ESMA can deliver any of these more quickly, perhaps through a “coordinated supervisory approach” rather than waiting for formal legislative amendments. Page 47 drops a hint but the concluding paragraph steers us back to formal consideration of Level 2 and 3 change.

Timing remains uncertain

So for now, the intermediate measures are where things get interesting.

ESMA itself notes that delivery “will depend on their legal nature.” Optimists amongst us will hope some burden reduction could arrive relatively quickly. Others may expect 18-24 months.

Downgrading supervisory priority without legislation is relatively straightforward when your boss is at Number 11 and their boss is next door at Number 10. It’s a rather bigger challenge when you need to align 27 member states.

For now until la rentrée, the depth of change coming under MiFIR and the precise timing would be speculation. The next key question is how quickly ESMA can complete the necessary impact assessments and move to implementation.

There may yet be timing surprises, particularly if ESMA and the relevant authorities identify areas where burden reduction can be delivered without waiting for full Level 1 reform.

Kaizen will continue to monitor developments closely and assess what the final report means for firms’ MiFIR – and other – reporting obligations, controls and assurance programmes.

For a conversation with Matthew or another of our regulatory experts about what ESMA’s proposals mean for your firm, please get in touch.