FCA Market Watch 70 – Recent Observations on Transaction Reporting

Topic:

Transaction Reporting

Date:

03 October 2022

Regulations

MiFID II and MiFIR

Although these observations are released by the FCA in respect of firms they regulate in the UK, they have significance for all firms subject to the equivalent MIFID II and MiFIR regimes in the EU.

Level of Significance of Change

No changes are required.  The aim of the FCA is to improve the quality and accuracy of transaction reporting and financial instrument reference data used by firms they regulate.

Main Points

While the FCA has been encouraged by firms making data extraction requests to the Market Data Processor (MDP) to perform reconciliation checks of their reporting, there are many who are still not conducting sufficient investigations. This is a requirement according to Article 15(3) of RTS 22 and failure to do so is a breach of reporting obligations.

The FCA has highlighted that firms are not performing sufficient checks on their data.  Reconciliation should be performed on full data samples and should not be limited to certain fields. While some firms are submitting breach notifications, the UK regulator has advised that firms should include complete references and comprehensive details on the Errors and Omissions Form, for example evidence of the error and measures taken to prevent the same error from happening.

Other concerns raised by the FCA include the need for firms to address the following common errors:

  • 1st priority national identifiers must be used to identify natural persons
  • Principal firms (not Appointed Representatives (ARs) are responsible for the completeness and accuracy of transaction reporting
  • Branch reporting of third country investment firms should take a consistent approach in determining when they are ‘executing’
  • Misuse of ‘INTC’ when signalling internal trading accounts
  • ‘XOFF’ should be used when there is no direct access to the trading venue
  • For non-ToTV financial instruments, e.g. CFDs, the instrument’s full name reported should contain a clear description of the financial instrument traded
  • Trading venues and SIs are reminded that they are responsible for providing timely and accurate instrument reference data to members

How Does This Change My Reporting?

These recent observations from the FCA do not require any changes to current reporting being performed by TRAction, however may necessitate updates or changes to internal processes being conducted by firms to conduct reconciliation and oversight of their delegated reporting provider.

What Do I Need to Do?

Investment Firms should regularly compare and reconcile the transaction reports held at their NCA against their internal back-office systems. TRAction suggests checks be made daily with an end-to-end reconciliation carried out at least once a month.

Should there be any breach, firms should include thorough details and an adequate background to facilitate a full review of the incident.

At TRAction, we are a specialised third party delegated reporting entity who can assist you in submitting your transactions to an Approved Reporting Mechanism.

Please contact us if you would like to know more about how to simplify your reporting.

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