The FCA has released its latest Market Watch newsletter which has a heavy focus on transaction reporting. The UK regulator says it is encouraged by the progress firms are making in terms of data quality and has released data showing the number of investment firms taking data extracts via their Markets Data Processor (MDP) is continuing to rise each year.
What is interesting is that although 716 firms requested data from the FCA’s MDP in 2021 to assess the accuracy and completeness of their reporting, this suggests that more than half of all UK MiFID firms are not doing so, a clear breach of their reporting obligations.
While the number of error and omission notification forms continues to rise, the data quality alerts suggest to the FCA that many firms are not conducting sufficient data checks including across asset classes. The quality of the E&O notifications (see our recent blog for tips on how to complete these) also varies, with the FCA explaining the usefulness of including examples of how fields have been misreported.
Other concerns include the over-use of second and third priority identifiers for natural persons as well as how firms are identifying appointed representatives. Greater improvement and consistency is needed in relation to branch activity and determining when trades are being ‘executed’ thus leading to a reporting obligation.
The order aggregation ‘INTC’ account is also being misused in certain cases and there is a warning to trading venues that they are responsible for the transaction reports made on behalf of their non-MiFID participants. It is stated that some venues have been putting too much responsibility on their members. The misreporting of the venue and the instrument full name fields is also mentioned.
Trading venues are also reminded of their obligations in relation to instrument reference data and Systematic Internalisers are often sending instrument reference data to FIRDS in error which is confusing reportability for firms under RTS 22. Instrument testing is of particular sensitivity due the dependence on the quality of the data for the wider transaction reporting regime.
While the FCA has seen improvements in transaction reporting, today’s comments show that the regulator’s expectations around transaction reporting are increasing, and robust and comprehensive testing must be in place for all firms.
Read the newsletter on the FCA’s website.
- If you are unsure about any of the reporting standards, or just need a refresher, we would heartily recommend our core training course which will help ensure you are interpreting the MiFIR transaction reporting details correctly.
- Kaizen’s ReportShield quality assurance services are designed to detect all reporting errors including those mentioned in the FCA’s Market Watch 70. Contact us for a conversation about how we can get your transaction reporting in the right shape.