It was great to be a part of last week’s Trade and Transaction Reporting Northern Europe Conference in Stockholm and in particular, hear insights from the European Commission and the Dutch and Finnish National Competent Authorities (NCAs) on EMIR and MiFIR, as well as the latest on SFTR reporting timelines.
European Commission’s Fitness Check
Gerd Heinen, Policy Officer at the European Commission, spoke about the Commission’s ‘Fitness Check’ on supervisory reporting. The objective of the Commission’s project is to “identify areas where the cost and burden of supervisory reporting can be reduced without compromising the objectives of financial stability, market integrity, and consumer protection”. I’m sure both the reporting firms and the recipient regulatory bodies would agree this is a worthy and valuable project. However, the two sides certainly didn’t agree in their responses to the Commission’s public consultation, particularly on whether the reporting requirements were fit for purpose.
The Commission published a summary report following its consultation, which contains some fascinating statistics and cost estimates. My particular favourite is that only four per cent of respondents thought that all the existing supervisory reporting requirements were relevant for maintaining financial stability and upholding market integrity and investor protection. I also enjoyed the Commission’s observation that “out of 391 responses received, 258 came from industry stakeholders (all of which were in the same sector and from the same member state), who provided very similar responses to sections 1 and 3”.
The Commission expects to publish its conclusions of its Fitness Check in the first half of 2019 and ‘if necessary’ follow publication with recommendations to streamline and simplify supervisory reporting.
MiFIR data quality issues in Europe
I equally enjoyed a joint presentation from the Dutch and Finnish National Competent Authorities (NCAs) on their observations on MiFIR transaction reporting implementation. From a Brexit perspective, it was interesting to note that just over 50% of all transaction reports received by the Dutch NCA were from UK firms routed via the UK’s FCA. The corresponding figure for the Finnish NCA was even higher at roughly 80%.
When it came to reporting quality issues, the Dutch and Finnish regulators presented the following areas of concern:
- Gaps in reporting
- Rejected transactions not corrected
- Use of CONCAT instead of higher priority identifier
- Incorrect national identifier format
- Wrong trading venue identifier (On market vs XOFF) – Operator MIC instead of Segment MIC
- LEI codes
- Timestamp granularity
- Default trading times
- Trading place identifier
- Reporting of transaction chains
- Non-flat ‘INTC’ end of day.
There are some similarities here with the UK FCA findings presented in their summer forum. However, it is noticeable that this work extends beyond the relatively simple ESMA defined validations and firms need to be aware that the NCAs are now extending their quality assessment to ‘business validations’ such as ‘flat INTC accounts’ as well.
At Kaizen, we believe you need to be a few steps ahead of the NCA in discovering errors in your transaction reports. Even if reports pass through the ARM and NCA validation checks, it doesn’t mean that the data contained within them is correct. Our accuracy testing service carries out over 1000 tests on every transaction report to detect errors and give full transparency of the quality of your reporting so you don’t fall foul of the regulator.