It’s been nearly 2 years since MiFID II went live and firms are continuing to enhance compliance of their MiFIR transaction reporting solutions.
Post MiFID II go-live back in January 2018, many firms identified residual issues with their transaction reporting and have embarked on an iterative process to remediate these issues with the ultimate goal of migrating transaction reporting to a true business as usual activity.
Prompted in part by recent fines levied on the likes of Goldman Sachs and UBS, and recent FCA Market Watch Newsletters (Market Watch 59 and Market Watch 62) highlighting areas firms should focus on with regards to transaction reporting, the focus for firms is on their transaction reporting operating model and control framework; to ensure that transaction reports submitted to their National Competent Authority are complete, accurate and timely.
Two of the most significant issues firms currently face are
- The divergence between the transaction reporting rules and what the firm has actually implemented
- The lack of a robust reconciliation process to provide assurance of transaction reporting accuracy and completeness
On this second point, Market Watch 59 highlights the insufficient levels of requests from firms to access their data held in the MDP for reconciliation purposes – a clear red flag for firms that are still not reconciling their transaction reports Further, Market Watch 62 suggests many firms are still relying on data samples from their ARM for their transaction report reconciliation.
Transaction reporting operating models and control frameworks need to be reviewed and regularly tested to identify and address gaps, and to demonstrate to your NCA that the firm has robust processes and controls in place. Operating model and control framework gaps will typically manifest themselves in under-reporting, over-reporting or reporting incorrectly and if not addressed can result in lengthy periods of incorrect reporting that could result in financial penalties.