Market Watch 59 is ‘almost totally dominated by Transaction Reporting Observations’ and marks yet another strongly worded message from the Financial Conduct Authority on the importance of complete and accurate transaction reporting and how it is critical to the FCA’s work to ensure that markets function well.
As ever, the FCA stress the importance of adequate systems and controls over transaction reporting and highlights how these requirements are clearly defined in Article 15 of RTS22. In particular, the FCA stresses the importance of reconciliation of front office trading records against data samples from the NCA. It also notes that some market participants don’t appear to be aware of the FCA’s facility to provide this data and the need for regular and thorough reconciliation.
Valid but incorrect reports
One of the more important messages from the FCA’s Market Watch is that:
“Firms should not assume that a report was accurate because it was accepted by the Market Data Processor, as business validation rules are not intended to identify all errors and omissions”
As we already know at Kaizen, there are too many ‘valid but incorrect’ transaction reports. In amongst the errors highlighted by the FCA are a number of old favourites, including the transposing of the buyer and sell:
- Incorrect time (especially after the transition to British Summer Time!!!)
- Price not reported in the major currency
- Venue populated with the operating MIC where a segment level MIC is available
- Misreporting the buyer as the seller and vice versa (oh come on!)
- Re-use of identifiers for multiple clients
- Incorrect client type code
- Inconsistency between trading capacity and buyer/seller IDs
Instrument Reference Data
There is slightly conciliatory tone on the rejections where the instrument ID, or underlying instrument ID, is not present on FIRDS. Whilst the FCA is still keen to point out this is sometimes the firms’ fault, using the wrong Venue code for example, quite often it results from incorrect reference data submitted by the trading venues. The FCA is clearly sending a message to the trading venues and systematic internaliser that greater control is required over their RTS23 reference data submissions.
Errors and omissions notifications forms
The FCA’s observations end on a particularly worrying note for many firms. It reminds firms that where errors or omissions are identified in transaction reports, participants must submit a corrected report to the NCA. Alas, the FCA has noted that some firms are submitting an errors and omissions form, but not subsequently correcting the errors or correcting errors without submitting an errors and omissions form. The FCA does not appear to be happy about this!
How Kaizen can help
This is exactly what we here at Kaizen exist to do. We have a proven track record in helping firms tackle their trade and transaction reporting issues and risks head on – and helping them to avoid censure whether it is for RTS23, MiFIR, EMIR, Dodd-Frank or another G20 regulation. Please contact us for a discussion with one of our regulatory experts to find out more.