Treliant Takeaway…FCA MarketWatch – Spotlight on Transaction Reporting

FCA MarketWatch – Spotlight on Transaction Reporting

• Source: fca.org

Treliant Takeaway:

Treliant can provide end-to-end support on transaction reporting regulatory obligations, including helping firms design, develop, and implement Day-1 trade and transaction reporting readiness business models. We can help with conducting regulatory and technology gap analysis, designing and implementing reporting controls, remediation and governance frameworks, reviewing and enhancing swaps reporting operating model controls, collateral and T+1 reconciliations, backfilling operations line functions to supporting testing, reporting and enhancement of reporting controls, client outreach, constructing enterprise data architecture (including cloud), and other such use cases. Treliant’s EMIR Refit reporting tool readily helps firms carry out trade and position level field level validations.

Highlights:

As firms navigate through their implementation efforts towards EMIR Refit go-live next year (EU EMIR Refit goes live on April 29, 2024, followed by UK EMIR Refit launch on Sept. 30, 2024), FCA’s latest MarketWatch puts the spotlight on transaction reporting and submission of instrument reference data.

FCA’s supervisory observation pertaining to transaction reporting include issues such as:

• Inconsistent price and quantity notations;
• Front-office trade reconciliations. It is worth noting that at the point of go-live, there will be 85 reconcilable fields and an additional 66 fields will be introduced into the reconciliation 2 years post go-live;
• Data breaches;
• Improper identification of the primary responsibility around investment or execution decisions;
• Issues around reporting complex trades;
• Misidentification of funds as the buyer or seller in a transaction report while dealing with a fund manager;
• Faulty agreements between the “transmitting firm” and “receiving firm”; and
• Improper reporting of instrument details such as default expiry dates, expiry dates precede the trade date, unreported expiry dates, incorrect classification of financial instrument with the instrument name etc.

FCA’s supervisory observation pertaining to instrument reference data include issues such as:

• Late reporting by trading venues and SI’s (systematic internalizers);
• Submission of instrument reference data that are not MiFID financial instruments, such as spot FX; and
• Failure to cancel the instrument reference data submitted in error.

Both ESMA and FCA have made it abundantly clear that their versions of EMIR should be considered as separate reporting regimes with no guarantee that they will remain aligned in the future which means reporting entities are to ensure that their reporting systems are operationally separate where possible. With the reporting fields increasing significantly from 125 to 203, one cannot underscore the importance of mapping the relevant data from their internal systems to populating these new reporting fields.

Furthermore, the expectations around the use of UPI & UTI, valuation reconciliation, pre- and post-haircut collateral reporting, end of day report SLAs covering trade activity, trade state, rejection reconciliation, abnormal values report and addition of new reporting fields such as direction of leg 1 / leg 2, multiple notional schedule fields and package fields, entity legally responsible for reporting etc., means greater scrutiny by the regulators in the coming months to ensuring that firms have put in place appropriate remedial actions to address the shortcomings in their reporting processes and reporting infrastructure.