Since the introduction of transaction reporting, firms have spent significant proportions of their compliance budget on the initial implementation and ongoing technological solutions to ensure transactions are being reported to the regulators correctly and on-time.
Firms often wonder out loud if regulators truly scrutinise the data quality and accuracy of their submissions. Whilst regulators state that transaction reporting is a critical component of their oversight framework to detect market abuse or monitor market exposure, their actions now demonstrate an increasing focus on data quality as the transaction reporting landscape matures.
Given that EMIR is an established regime which was first implemented in 2012, it is expected that regulators will only continue to increase scrutiny on data quality.
What are the common issues?
Firms have been actively engaged by regulators in relation to:
- Collateralisation status,
- Corporate sector codes,
- Valuation amount, and
- Notional value fields
to ensure these are accurately populated and reported.
We have recently seen both the Central Bank of Ireland (CBoI) and the Cyprus Securities and Exchange Commission (CySEC) raise concerns with reporting counterparties on data quality and accuracy.
Further, CySEC has been requesting immediate remediation plans where expectations are not met. There are several areas commonly raised by CySEC such as outstanding trades or positions, missing Maturity Date and missing valuations.
Under Article 9(1) of EMIR Regulation (EU) No. 648/2012, counterparties must ensure all lifecycle events such as modification or termination of the contract are reported to the regulator, within the expected deadline.
What went wrong?
Some of the common reasons for outstanding open trades or positions can include:
- Movement of internal groups within a firm,
- Maturity Date field not populated on trades, or
- Trade closes are not reflected in trading systems.
Where there are incorrect notional values or valuation amounts, this could have resulted from inconsistent contract sizes being recorded in the system.
What should you do?
It is important to get the raw data right in the first instance before you or your delegated reported service provider such as TRAction submits to the trade repository.
Clients need to ensure all trades which have been moved internally to a different group are reflected in the reporting data sent to TRAction. Although the Maturity Date field is an optional field, if there is a scheduled Maturity Date for a trade (for example Options or FX Swap), this field must be reported.
As a delegated reporting service provider, TRAction ensures clients reporting under EMIR meet their reporting requirements by performing trade state report reconciliation to review data provided by clients are being reported accurately.
TRAction also provides monthly reporting statistics which contains the number of open positions submitted to the regulator on each business day. This report provides an overview of your daily submissions in a month and can be used to review if there are any outstanding open positions which should be terminated.
UnaVista also offers a read-only terminal which our clients can elect to utilise to review open positions. UnaVista can be used to monitor trends within transaction reporting, aiding identification of where errors are recurring.
If you would like to discuss your reporting obligations, please contact our team.