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Regulators, in recent years, have increased market surveillance by enforcing mandatory disclosures via Trade and Transaction Reporting (as per MIFID II and EMIR). In MarketWatch 70, the FCA highlighted some observations on the deviation from its regulatory guidance by firms as evidenced in the inaccuracies and shortcomings in their Transaction Reports (TRs) and Instrument Reference Data (IRD). FCA also set out guidance for firms to take corrective actions.
Below outlines the key challenges firms should focus on and suggested actions on how to tackle them.
1. Transaction Reporting
The first main observation that the FCA made was around transaction reporting challenges. In particular, there were two primary issues the FCA highlighted that led to inaccuracies in reporting;
2. Instrument Reference Data
The second set of observations that the FCA made was with respect to Instrument Reference Data. Below are the main issues that the FCA highlighted;
A.Have a system in place to identify incomplete and inaccurate instrument reference data in submissions and inform the regulator of the same.
B.When the FCA MDP (Market Data Processor) system provides feedback on all the reference data files received, trading venues and SI's should have an arrangement to review the feedback and investigate it further in a time bound manner.
A proficient way to proactively identifying potential issues – and one encouraged by the FCA – is for firms to obtain TR sample data from their MDP and review and reconcile the data with their reports. FCA statistics show that although there has been an increase in firms requesting data from their MDP, volumes are still relatively low.
In conclusion, firms should proactively look at best practices, put in place periodic due diligence and create a better surveillance framework to identify common issues before they lead to large data reporting issues. Firms can start remediating by prioritising the heavily impacted areas and gradually reaching an optimum point of compliance. Self-identification of issues, rather than waiting for the FCA to identify, has historically been an approach that has been appreciated by the FCA. Doing so has also been shown to drastically reduce potential fines should the FCA decide to levy them.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Hugo Chamberlain Chief Commercial Officer at smartKYC
17 April
Mouloukou Sanoh CEO and Co-Founder at MANSA
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Ruchi Rathor Founder at Payomatix Technologies
Sakkun Tickoo Digital marketing consultant at Wonderful Payments Ltd
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