Significant focus on Transaction Reporting in the 2021 Work Program released by ESMA

Trade and transaction reporting have featured prominently in the upcoming Work Program for 2021 of Europe’s supranational corporate regulator, ESMA.

Data quality remains a key objective for ESMA when it comes to transaction reporting. The report split out ESMA’s focus and expectations under both the EMIR and STFR regimes.

For EMIR, ESMA has stated that its supervisory approach is data-driven and risk based. In 2021, ESMA’s main supervisory objective will continue to be the enhancement of the quality of data reported to trade repositories under EMIR. ESMA will continue its implementation of the Data Quality Action Plan (DQACP), a program it launched in September 2014 to standardise and improve data received by regulators across Europe. In its Work Program, ESMA has said that the DQACP will provide accessibility, accuracy and integrity to EMIR reports, identify anomalies and allow EMIR reconciliation across European borders.

Great effort by ESMA will be undertaken over the next 12 months to ensure continuity of EMIR trade reporting from pre-Brexit to post-Brexit legal entities. It is anticipated that many firms will amend their IT infrastructure arrangements including location and architecture. Firms are reminded to provide an uninterrupted and stable service amidst these changes.  ESMA voiced concerns on firms’ general approach to IT strategy, IT system development and IT outsourcing. A warning to firms to avoid ESMA’s risk-based binoculars.

ESMA also noted it would assist in the ‘smooth winding down plans of any registered trade repository withdrawing its registration’ – a clear reference to CME’s shock announcement to leave its trade repository businesses in Europe and Australia.

With regards to the SFTR, ESMA asserted that it expects its supervisory work will focus on performing re-validations on SFTR submissions to ensure reports are in line with validation rules, assessing completeness and accuracy of SFTR Trade State and Activity reports and assessing STFR reconciliation.

Stable Trade Repository SFTR service will remain a focus in the headwinds of COVID-19 and Brexit. ESMA reminded participants to monitor resource allocation to SFTR and IT performance and capacity of the SFTR.

With regulatory change mandated in Q2/Q3 2020, namely cloud computing and SFTR guidelines on positions, ESMA has stated its active role as regulator to ensure implementation.

ESMA expects to liaise with all stakeholders over the next 12 months in regards to the trade reporting regimes it oversees.

A version of this article appeared on Finance Magnates, and can be viewed here.

Quinn Perrott

Quinn is co-CEO and founder of TRAction and focuses on assisting clients in Europe, Asia and Australia to meet their regulatory requirements with trade and transaction reporting solutions as well as development of the best execution platform. With a background in IT, Quinn started in the financial markets as IT Manager for City Index. He then co-founded and worked as a General Manager at one of Australia’s largest margin FX and CFD providers. Quinn has provided educational sessions to Australia’s regulatory bodies in relation to operational aspects of derivatives and trading platforms.