• Gaurav Chandra, Product Manager at AxiomSL


• 28.04.2017 06:30 am
undisclosed , Gaurav is very apt at discussing the development of trade and transaction reporting towards the complex disciplines that they have become today, providing insight into how regulatory developments have increased its complexity. He would like to stress the importance of an efficient, integrated solution, in the wake of overlapping regulations within the EU, global regulatory differences and the inevitability of regulatory change.

In recent years, we have seen an increasing number of regulatory requirements that firms need to comply with, in particular when it comes to trade and transaction reporting. Many financial institutions have, so far, complied with various reporting regulations using siloed systems; however, with regulations constantly evolving and incoming new legislation, this is not a sustainable long term solution.

For example, the Markets in Financial Instruments Directive (MiFID) which introduced a transaction reporting regime across the European Union (EU) in 2007 will be significantly expanded in scope on 3 January 2018 to include all asset classes, the impact of which will be monumental.

MiFID II will require transactions to be reported to the appropriate regulator “as quickly as possible” in order to “reduce the risks of a disorderly market”. Failing to do so will be extremely punitive for market participants. Similarly, trade reporting will have to be reduced to a maximum of one minute from execution in some cases. Achieving this will be challenging for some firms, particularly those that have not had to carry out any regulatory reporting previously, as they will need the technical capability to carry out these processes in addition to good data governance and management. After all, efficient reporting can only be achieved if the data is accurate.

MiFID II is just one of a number of reporting regulations. Consider, for example, the European Market Infrastructure Regulation (EMIR) and the Securities Financing Transaction Regulations (SFTR), which will require the reporting of OTC and ETD derivatives, and repo and securities financing transactions respectively. And it’s not just European regulations that firms will need to comply with: Dodd Frank in the US and sweeping regulations across Asia, for example, have also imposed reporting regulations. And of course, all of these regulations have been or will be subject to amends and revisions in the coming years. One can see therefore just how complex regulatory reporting can become. This begs the question, should firms comply with each regulation separately in house with independent data collection and analysis and siloed reporting practices, or should they integrate their reporting which can greatly reduce the cost and complexity of regulatory compliance?

Not only this, market participants, large and small, which choose to outsource their reporting for multiple regulations, can be left with more resources to scale their business faster with less dependency on expensive and time consuming back office processes. But time is running out, with only just over six months ago until the big bang of MiFID II, firms should be well advanced in their preparations to comply with the reporting requirements, particularly given that contracts and UAT environments need to be put in place before reporting practices can become fully functional. It is widely anticipated that financial penalties for non-compliance or misreporting under MiFID II will start immediately after the regulation implementation date of 3 January 2018. So the message is clear, the time to act is now.