Have the Fundamentals of MiFIR Transaction Reporting Been Buried in the Detail?
MiFIR Transaction Reporting, like its predecessor regime, naturally entails a lot of detail. From data extraction and filtering, through to normalisation, enrichment, transformation and ultimately submission. All within the T+1 timeframe. But have the fundamentals of MiFIR transaction reporting been buried in the detail?
It can be tempting for regulated firms to dive straight into the multiple MiFIR Transaction Reporting fields, themselves normally a concatenation of several internal pieces of data, however, does this approach overlook the fundamental purpose and leave behind critical elements of regulatory risk management?
“… does this approach overlook the fundamental purpose and leave behind critical elements of regulatory risk management?”
At its core, MiFIR Transaction Reporting is a complete and accurate portrayal of a regulated firm’s regulated business activity and in a prescribed format. The latter is a mechanism to meet the former. Quite often however, instead the mechanism can become the main focus of a regulated firm and this approach can inadvertently exclude comprehensive and robust governance and control, from Board to BAU and in adherence with FCA’s Principles for Businesses.
“…this approach can inadvertently exclude comprehensive and robust governance and control…”
Failure to put regulatory governance and control at the heart of MiFIR transaction reporting can result in an inadequate picture of a regulated firm’s business being provided to the regulator, impairing their capabilities to detect, punish and deter market abuse and to meet their own objectives. As the industry has seen over the past decade, penalties levied are frequently as a result of not only a breach of the FCA Handbook’s Supervision requirements (often SUP 15 and SUP 17), but also for breaching FCA Principle for Businesses 3 “Management and control”. This is further underpinned by the expanded Senior Managers and Certification Regime (SM&CR), which places a duty of care upon Senior Management Functions (SMFs) to take reasonable steps to prevent or stop a breach. Can a holder of a Senior Management Function feel comfortable that all the information is available to make this judgement, without a governance and control framework being applied in tandem to the granular field based approach?
“Can a holder of a Senior Management Function feel comfortable that all the information is available to make this judgement, without a governance and control framework…?”
In its latest Market Watch, the FCA reminded regulated firms that it should not be assumed that a transaction report was accurate because it was accepted by the FCA and furthermore that firms should not use the transaction report acceptance rate as a standard for assessing the completeness and accuracy of their transaction reports. Ultimately the regulated firm must apply both forensic field review, whilst exercising a fit for purpose regulatory governance and control framework.
“…firms should not use the transaction report acceptance rate as a standard for assessing the completeness and accuracy of their transaction reports.”
GD Financial Markets is proud to be a Consulting Partner in UnaVista’s partner programme, which brings together the world’s leading financial services technology and consultancy firms to help the markets become more efficient and reduce operational and regulatory risk. GD Financial Markets‘ Regulatory Compliance Practice exists to provide regulatory expertise coupled with deep business understanding and is ready to assist regulated firms in achieving practical, pragmatic and robust regulatory governance. This is aligned to the help that UnaVista, part of London Stock Exchange Group, provides to firms to reduce operational and regulatory risk through a range of regulatory reporting, reference data and analytics solutions.