ESMA’s 2024 Data Quality Report: Increased Focus on SFTR Data Quality
ESMA’s Report on Quality and Use of Data for 2024 (published 30 April 2025), delivers a clear message: “ESMA expects that reporting entities increase the quality of their reported data significantly” and “the quality of the SFTR data still has large margins of improvements.”
A particularly encouraging development is the “enhanced cooperation with BaFin,” where ESMA and BaFin established “an enhanced periodic engagement” with BaFin stepping up their approach and increasing targeted efforts. This marks positive progress in what had previously appeared to be somewhat polarised regulatory scrutiny across the EU.
SFTR Data Quality Indicators Now Fully Implemented
ESMA finalised its Data Quality Indicators (DQI) approach for SFTR in 2024, following their successful introduction for EMIR in 2022. Prior reports highlighted concerns, most notably the overstatement of open term securities loans values during 2021-2023, but there was relatively little structured analysis before the DQIs. ESMA notes that “a TR issue due to which inflated market values were observed has been resolved with the pending correction of historical data being monitored,” likely referring to reporters’ failure to send terminations or add maturity/end dates to open term securities loans.
Key SFTR Data Quality Indicators Revealed
Missing Valuations (DQI 5a)
This metric shows significant improvement, falling from 26.3% in March 2023 to 8.5% by December 2024, though still above ESMA’s 5% threshold. The “dramatic” improvement was due to “amelioration of reporting by a few of the major reporting entities.”
Outdated Valuations (DQI 5b)
Of all DQIs, this remains “the worst among depicted DQIs,” despite falling from 41.4% in March 2023 to 26% by December 2024. ESMA emphasises: “Having updated information in times of adverse market movements and crises is crucial for authorities” and it is “imperative for counterparties to swiftly follow on the identified issues with outdated valuation.”
Trade Reporting Discrepancies (DQI 1a)
This indicator shows an average of 35% mismatch in outstanding SFTs between counterparty pairs – far above the 5% threshold and higher than EMIR’s 20.5%. This is remarkable considering that many SFTR reports are single-sided, and many dual-sided reports are generated by a single party with pre-matching and third-party data enrichment.
Position-Level Discrepancies (DQI 1b)
This indicator measures differences in position-level reporting between counterparties. While ESMA highlights this metric, position-level reporting is relatively uncommon in SFTR, making its prominence in the report somewhat curious.
Entity Responsible for Reporting (DQI 9a)
This field identifies who is responsible for reporting (UCIT managers for funds, AIFMs for AIFs, etc.). Though important for attributing data quality errors to the correct entity, this metric showed modest issues at 1.9% by end of 2024.
Regulatory Expectations Rising
ESMA’s commitment to data quality is clear: “ESMA always encourages the amelioration of reporting even in cases where the error rate is below the DQEFs which govern actions taken to tackle data quality.”
Our Perspective
At Kaizen, we welcome the increased focus on SFTR data quality five years after implementation. The publication of the Data Quality Engagement Framework and DQIs provide important steps toward greater regulatory certainty.
However, we are cautious about equating matched reports with high-quality data. We would also challenge the focus on securities lending data elements and the relative absence of repo data given its greater systemic risk significance.
Is your SFTR reporting in good shape? Can you evidence this? Kaizen provides comprehensive quality assurance for accurate, complete and timely SFTR reporting. We also provide Daily Controls for SFTR delegated reporting arrangements.
Contact us to request a demo or for a conversation with Jonathan or one of our regulatory experts.
