The FCA have recently released a discussion paper about Improving the UK transaction reporting regime. In its monitoring of the UK transaction reporting regime (i.e. UK MiFIR and MiFID), the FCA has identified some areas requiring improvement in the regulatory framework. In particular, areas to focus on are around the data quality being reported and how to minimise the regulatory reporting burden on firms.
The FCA is considering ways to harmonise transaction reporting and support market integrity. Feedback to the DP closes on 14 February 2025.
Summary of FCA findings
The UK transaction reporting regime appears to be working well, particularly given the scale of changes made to UK EMIR in September 2024. The FCA have identified improvements that can still be made in their supervision, technological developments and engagement with participants. In identifying areas requiring improvement, the FCA have analysed data from 1 January 2021 to 30 September 2024 (Post-Brexit Period).
The FCA are of the view that only useful data should be reported – in order to move to more simple rules and to shape the landscape into a more suitable market for UK market participants, the FCA noted that it is likely there will be future UK deviation from the EU transaction reporting requirements.
It was also noted that:
- between UK EMIR and UK MiFIR there is duplication and overlap. This is due to inconsistent terminology, differences in data formatting.
- data should only be reported once, but used for multiple purposes.
Given the significant recent changes that were made to UK EMIR in 2024, the FCA have decided that now is not the right to time to remove the duplicative reporting requirements.
Potential changes to RTS 22
The FCA have considered potential changes to fields in RTS 22 (Reporting of transaction to competent authorities) to improve data quality, noting it currently contains 65 reportable fields – these included:
- Consideration of new additional fields to improve data quality such as the potential use of an aggregate client linking code (INTC) and the digital token identifier (DTIs) for digital tokens.
- Removal of existing fields to streamline reporting on indicators e.g. waiver, OTC post-trade, short selling, commodity derivative and securities financing transaction.
- Requiring clearer guidance relating to issues such as the transmission of order indicator (and the use of ‘transmission’), TOTVs and TVs, identification of trusts in transaction reports, use of incorrect tags and on the reporting of chains with intermediary brokers.
Some analysis from the MiFIR Data
The data the FCA has analysed is from the Post-Brexit Period. This period was selected to see how the UK markets have evolved since Brexit.
Overall, the main highlights of the FCA’s analysis relating to reporting since 2021 are below:
- Number of transaction reports received by trade date and by submission date has declined. The difference between these two sets of data indicates the amounts of reports that were back-reported during the period.
- The bulk of the transaction reports relate to equities (69%) and futures & forwards (15%).
- Transaction reports received according to trading capacity or submitting entity type (e.g. approved reporting mechanism (ARM), investment firm or trading venue) has roughly stayed the same.
- The number of transaction report cancellations submitted by submission date and trade date has drastically declined (in the millions) – this could suggest an improvement in data quality.
- Data relating to breach reporting notifications have stayed about the same.
Feedback sought from Market Participants
Chapter 4 and Annex 1 of the DP list 41 questions for feedback. Some questions focus on:
- Trading venues and ‘Traded on a trading venue’ (TOTV):
- Any difficulties in identifying if the financial instruments are TOTV, particularly with OTC derivatives and the use of product identifiers;
- any fields or trading scenarios that are challenging to report;
- is there support of the idea of UK Trading venues to report for all UK branches of third country firms;
- any other suggestions for improving the usefulness of the trading venue transaction identification code (TVTIC) and simplifying other aspects of the relevant reportable fields;
- the use and accessing of FIRDS.
- Is there support for a change in the scope of reportable instruments under UK MiFIR to align with UK EMIR?
- Suggestions to reduce reporting costs for smaller firms including consideration of an opt-in register of UK investment firms that are willing to be a ‘receiving firm’ (i.e. the firm that receives relevant details about an order from a party that is transmitting such data to it).
- Whether data quality can be improved through new technologies or messaging standards? What changes can be made to remove duplication in other UK wholesale market reporting regimes? Areas that are most challenging in the transaction reporting regime?
- Specific questions relating to certain indicator or data fields (including adding new fields) and identifiers such as:
- ISINs;
- UPIs; and
- DTIs – reporting issues or other suggestions in identification of trading of tokenised securities.
How can TRAction assist?
If you would like TRAction to assist in preparing your feedback to the FCA in relation to this discussion paper or more generally, with your transaction reporting requirements and queries, please get in touch with us.
