Firms facing transaction reporting obligations often find themselves navigating multiple regulatory regimes such as MiFID II, EMIR, Dodd Frank, and ASIC. Despite awareness of their duties, many aren’t doing enough to meet the stringent regulatory standards.
The intricacies of transaction reporting coupled with its crucial nature make it a hotspot for errors. Ensuring meticulousness, comprehensive reporting, and due diligence might seem straightforward but are often where lapses occur.
Adapting to ever-changing regulations is pivotal. Keeping abreast of these changes and common discrepancies can be the dividing line between an institution achieving compliance or facing regulatory repercussions. We’ll delve into prevalent transaction reporting mistakes and offer insights on how to sidestep penalties.
So, why do regulators hold transaction reporting in such high regard? Bodies like the FCA, ESMA, and CFTC harness transaction reporting as a tool to “detect and investigate market abuse”. It plays an instrumental role in safeguarding investors, curbing financial crime, and maintaining the sanctity of financial markets. For financial institutions, this underscores the importance of investing in stringent reporting systems. The focus should be on proactivity in accurate data identification and reporting to knit together compliance frameworks.
Three pressing transaction reporting mistakes have emerged:
- Misinterpretation of regulatory requirements: Many firms misjudge the exact data sets sought by regulators. Gaps in comprehension often give rise to transaction reporting errors. These mistakes might manifest as missing data or misinformation. The FCA champions consistency in market conventions, especially regarding notations in price and quantity fields. The remedy? Guaranteeing completeness and precision in all required data fields. A consistent regimen of data validation and reconciliation can pinpoint and rectify inaccuracies.
- Flawed reporting solutions: Sometimes, it’s not the comprehension but the reporting solution that’s flawed. For instance, wrongly labelling a derivative trade or mismapping products can be problematic. A frequent misstep is sourcing data from an incorrect timestamp. It’s imperative to regularly review trade classifications and test the solution’s coding to circumvent such pitfalls.
- Erroneous static data: Even with perfect regulation interpretation and mapping, erroneous static data can mar reporting. Often, this stems from missing or incorrect counterparty information, thereby hindering the regulator’s ability to monitor market activities. Addressing this necessitates rigorous data quality checks and alert mechanisms for reporting teams.
The aftermath of transaction reporting blunders is grave. The FCA’s data accentuates the imperativeness of accurate market data submission. Non-compliance repercussions range from regulatory fines, escalated scrutiny, reputational hits, competitive setbacks, to burdensome legal entanglements. The FCA’s robust emphasis on transaction reporting is evident. Their July 2023 Market Watch 74 release spotlighted 745 data extract requests and 346 breach notifications in 2022. The CFTC also followed suit, imposing fines of over $50m on three Tier 1 banks in September 2023 for Dodd Frank reporting lapses.
Eradicating these oversights is feasible with the Novatus TRA platform. Our seasoned team offers bespoke support throughout the reporting journey. The top-tier Novatus Transaction Reporting Assurance Platform (TRA) not only assures comprehensive, accurate, and prompt reporting but also boasts of reduced operating costs, full regime coverage, swift error detection, and automation to minimise human errors.
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