Laura WilesFCA’s latest edition of Market Watch explores transaction reporting issues, and highlights its concerns with firms not paying sufficient attention to its warnings on the importance of reporting transactions in a complete, accurate and timely manner.
Among its conclusions on transaction reporting, FCA noted that:
- While the number of firms accessing its Market Data Processor Entity Portal to make transaction report data extract requests has been steadily increasing since 2018, it has recently contacted certain firms who were not aware of the portal, or were relying on data extracts provided by approved reporting mechanisms to conduct their reconciliations. Under RTS 22, firms are required to reconcile front-office records with data samples provided by FCA.
- Firms should be mindful of the validation rule which rejects transaction reports submitted more that 5 years after the trade date when planning back reporting exercises. While errors and omissions notifications should still contain details of when the issue first occurred and the number of affected reports, even if beyond 5 years, FCA does not expect firms to cancel transaction reports with trade dates 5 years older than the submission date.
- Where more than one person or algorithm is involved in an investment or execution decision, the one taking primary responsibility for the decision should be identified in the transaction report.
- FCA identified a range of practices from firms where a natural person is assigned responsibility, including to senior managers. It challenges firms to consider whether it is appropriate to assign primary responsibility to senior management within the firm who oversee investment or execution decisions, but have limited practical involvement at a transactional level.
- Complex trades had been misreported inconsistently with ESMA guidelines. It urged firms to continue to apply those guidelines and recommendations where appropriate.
- Firms are expected to follow market convention when determining price and quantity notations.
- Firms should ensure consistency in the identification of all relevant parties within a chain of intermediaries.
On instrument reference data, FCA noted that:
- Trading venues and SIs must submit instrument reference data by 21.00 CET on each day they are open for trading, and should have adequate systems and controls in place to detect and address late reporting.
- Reference data should not be submitted for instruments that are not within the scope of MiFID, such as spot FX.
- When instrument reference data is submitted to FCA in error, it should be cancelled by the submitting entity.