Highlights from the EMIR & MiFIDII/MiFIR Reporting conference
Risk Focus is proud that we were the Gold Sponsor and our CEO, Brian Lynch, was one of the featured speakers at the recent EMIR & MiFIDII/MiFIR Reporting conference held in London on 28th, 29th April 2015. The conference covered many aspects of the unprecedented regulatory demands around data management and reporting including managing the existing operational challenges as well as preparing for the new trade and transaction reporting obligations coming into effect in 2017.
The list of speakers and panel members of the two day event covered the depth and breadth of the industry and included representatives from:
- Trade Repositories (DTCC, UnaVista, Regis TR, CME Group, ICE Trade Vault)
- The European Commission
The excellent list of speakers ensured the event was very well attended with delegates from both buy and sell side firms and intermediaries. This is no surprise given the timeliness of the conference with ESMA Level 2 and MiFID II/MiFIR Q&A information having been very recently released.
The following statistics show the current situation and serve to highlight the magnitude of the work required to implement the increase in volume and complexity of the data contained in the forthcoming regulation:
- Since Feb 2014, a total of 10 billion reports have been received and processed by the EU TRs.
- The number of entities which have direct reporting agreement with TRs is nearly 5000
- The TR’s still only reconcile less than 1% of trades reported by multiple counterparties across multiple trade repositories
- As of Jan, around 300 million trade reports were being submitted on a weekly basis by the counterparties subject to reporting obligation and then processes by the six registered TRs.
The new regulations and directives will force structural and technical changes to be made both from a data quality and maintenance perspective as well as a control framework perspective. Given the experience of previous EMIR and MiFID implementations, the regulatory authorities have given a longer consultation period and a longer implementation timeline which has been well received by the industry but both ESMA and the FCA urged anyone affected by the regulations to act now. Although not explicitly stated, the inference was that the leniency around accuracy and timeliness afforded in previous regulatory implementations, namely EMIR and MiFID, would not be present this time round.
However, the depth and nature of the additional information required coupled with the need to get it right on day one meant that the overarching theme’s that were common throughout the conference and which all the speakers and panel members referred to time and again were the need for better data quality and an effective control framework.
Data Quality and Control Framework
The increase in the number of fields from 25 to 81 required by the new regulations for transaction reporting coupled with the increase in the number of firms that will need to report will see a significant uplift in the volume of data being submitted to and between TRs. It will also increase the volume of static data that must be accurately determined, stored, updated and disseminated.
The content of the new fields will include personal data for which firms will need to implement new control frameworks and business processes as well as improve existing data management processes from front to back office. This will be no small undertaking and will require improvements in communication between – or better still centralization of – multiple functions within some of the larger firms.
The increase in and implementation of a control framework isn’t only limited to the gathering, storing and updating of static data. It will also have to be extended to cover accurate record keeping of any transaction reporting issues, of any failures and the subsequent issue resolution and route cause analysis, of over and under reporting, and of pre and post trade validation.
The following emphasizes the breadth and depth of the changes required:
- Data Quality
- Must ensure completeness and accuracy of the instrument reference data before submission
- Arrangements to identify submissions that are incomplete or contain obvious errors
- Perform periodic validations for fields, formats and contents according to the technical spec
- Correct erroneous and incomplete submissions immediately
- Mechanisms to avoid duplication (e.g. Transaction Reference Numbers)
- Mechanisms to avoid over reporting
- Mechanisms to avoid under reporting
- Track and retain all corrections
- Track and retain all TR failures (even if they are subsequently rectified)
- Back reporting
- Mechanisms to notify and rectify without delay over and under reporting as well as errors for trades executed within 5 years of when the issue was identified
- Comprehensive testing of reports
- Quality Assurance
- Regular reconciliation from front to back office
- Ensure the reports cumulatively reflect changes in positions of the firm and/or its clients
In summary all affected counterparties need to start preparing for MiFID II/MiFIR immediately. The extent to which the regulations will affect firms cannot be underestimated. If there are issues and/or questions, they need to be raised now.
More details of the conference including speakers, agenda and content can be found on the Infoline website here: http://www.infoline.org.uk/event/Trade-and-Transaction-Reporting-Conference/