The FCA has incorporated data quality reviews into its supervisory programme by conducting desk-based analyses and on-site inspections of counterparties.
In this respect, the FCA has included in Market Watch 59 and 62 a list of common errors observed in MiFIR transaction reports and highlighted the importance of firms maintaining adequate systems and controls to ensure transaction reports are complete and accurate.
More recently, the FCA published a Dear CEO letter referring to the fact that several firms incorrectly classified financial transactions as falling within the prudential matched principal exemption. A wrong understanding of a firm’s FCA permission may impact the correctness of the reported ‘trading capacity’ field as well as the quality of the overall reporting.
In regard to EMIR, in late 2019 the European Securities and Markets Authority (“ESMA”) published its findings for the peer review it conducted into the supervisory actions of six NCAs (including the FCA). ESMA expects NCAs to integrate an assessment and analysis of EMIR data quality into their overall supervisory approach.
In light of ESMA’s EMIR peer review, the FCA is expected to intensify its supervisory review.
What regulated firms should do
- Review the outstanding EMIR positions reported to Trade Repositories in accordance with the relevant technical standards;
- Ensure the pairing of trades when both counterparties have an obligation to report;
- Perform reconciliations between back office data and data reported under EMIR and/or MiFIR;
- Ensure that EMIR and/or MiFIR reports are submitted on time and that all the necessary reporting fields are completed and the data reported is accurate;
- Monitor their reporting arrangements by assigning a responsible person, and;
Identify any issues and take appropriate remedial actions.
