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Market Watch 74 - Our Approach to Ensuring Compliance

Written by Mark Thornborrow

Market Watch 74 - Our Approach to Ensuring Compliance

eflow Global’s Response to Market Watch 74

In their latest Market Watch newsletter, the FCA highlighted the biggest challenges facing financial firms when submitting transaction reports. With the complexity of current regulations, reporting errors and omissions continue to plague firms. 

In this article, we’ll take a closer look at the key difficulties highlighted in Market Watch 74 and show how eflow Global’s transaction reporting tool offers solutions for them all. 


The Problem: firms not performing adequate reconciliation to ensure data accuracy.

The FCA’s Take:

We recently identified and contacted certain firms who have not been making regular data extract requests. […] Firms are required to reconcile front-office records with data samples provided by the FCA under Article 15(3) of RTS 22.

The Solution: Our Transaction Reporting solution offers semi-automatic three-way reconciliation on all your trade data ensuring accuracy from source (trading system) to intermediary (ARM/TR) to NCA. 

Breach Notifications

The problems: inadequate handling of errors and omissions including: 

  • resubmitting correct reports, 
  • not cancelling the first report which contains errors and then resubmitting correct report
  • not maintaining an audit trail of errors, fixes & resubmissions.

The FCA’s Take: 

Under Article 26(7) of UK MiFIR, where errors or omissions are identified in transaction reports, the firm reporting the transaction must cancel the report and submit a new corrected report to us. […] Errors and omissions notifications should still contain details of when an issue first occurred and the number of transaction reports affected, even if this extends beyond 5 years. 

The Solutions:  

Field-by-field error handling - Our transaction reporting solution ingests response files from ARMs, TRs and regulators which highlight erroneous fields. These fields can then be edited before resubmitting. 

Automatic report ordering - When edits are made to a report, the original report containing the error will automatically be cancelled prior to resubmitting the edited version. 

Note Taking Functionality - We offer note taking functionality to provide the essential audit trail of errors, omissions, when errors occurred, who handled them and whether they were solved to ensure compliance. 

Identification of Investment and Execution Decision Makers 

The Problem: Where more than one person or algorithm is involved in an investment or execution decision, the person or algorithm taking primary responsibility for the decision should be identified in the transaction report. Article 8(2) and Article 9(4) of RTS 22 require firms to establish pre-determined criteria for determining who is primarily responsible for making investment and execution decisions.’

The Solution: Extensive business analysis during the onboarding process. As part of onboarding, all eflow clients are provided with a team of data and business analysts. the client with a business and data analyst from the eflow team. These analysts will create a tradeflow  based on your trading activity and create a tailored data requirements template for you. The use of both the tradeflow and data requirements template allows clients to easily identify the relevant execution decision maker in the transaction report.

Inaccurate reporting of Complex trades 

The Problem: Inaccurate reporting of Complex trades including a simultaneous buy and sell of 2 or more instruments quoted at a single price.

The FCA’s Take: 

We have identified transaction reports submitted for spread trades which do not conform to the ESMA transaction reporting guidelines as a complex trade […] Example 117 in the guidelines shows that a single price must be populated in field 33 for a complex trade, and that individual transaction reports submitted for each leg of the complex trade should be linked by the same complex trade component ID in field 40. 

The Solution: A detailed, extensive onboarding process. As part of the onboarding and analysis process, our team of analysts will help you to understand what is reportable on each leg of any complex trades you may execute.  

Inconsistent Price and Quantity Notations 

The Problem: Inconsistent notation of price and quantity fields.

The FCA’s Take:

We have identified inconsistencies in the notations reported by investment firms for the price and quantity fields. In cases other than where a specific price or quantity type is required for the instrument traded (for example, credit default swaps (CDS) - price in basis points; equity - quantity in units), firms may determine the most appropriate notations to report. We urge firms to follow market convention when determining which notation to use. Where possible, firms should ensure that the notations selected are consistent with those reported by their counterparties. 

The Solution: Integrated market data and thorough project scoping. During the scoping of each client’s requirements, we identify the correct input for price and quantity files to ensure a valid transaction report. In the case of EMIR reporting, integrated market data is used to benchmark price and quantity fields accurately. 

Reporting Instrument Details 

The Problem: Consistent data quality issues including unreported expiry dates, inconsistent CFI codes and inaccurate price multipliers.

The FCA’s Take: 

For transactions in financial instruments where instrument details must be populated in fields 42-56, we have seen variable data quality issues. […]Firms must make sure these fields are complete and accurate as we rely on them to identify the nature and attributes of the instrument traded.

The Solution: Integrated market data and FIRDs register. For MiFIR reporting, we will automatically cross reference all records received against the FIRDS register to ensure eligibility. For EMIR, market data will be integrated to benchmark price and quantity fields accurately.

Late Reporting

The Problem: Transaction reports not being submitted within an acceptable timeframe.

The FCA’s Take: 

Under Article 2 of RTS 23, trading venues and SIs must submit instrument reference data to us by 21.00 CET on each day they are open for trading for all financial instruments admitted to trading or that are traded on their platforms before 18.00 CET on that day.  […] Trading venues and SIs should have adequate systems and controls in place to detect late reporting. 

Solution: Automatic submission. Our transaction reporting solution allows users to automatically submit reports for relevant regulations with no need for manual intervention to ensure timely reporting and compliance.