Inaccurate reporting still a main fear for firms

Transaction reporting is still not high on the agenda for firms, despite the European Securities and Markets Authority’s (ESMA’s) fine to REGIS-TR last year, according to research from compliance advisor, ACA Group.

Charlotte Longman, director and co-lead of the ARRMA Service at ACA Group

Instead inaccurate reporting is one of the main concerns. There is a fear that this could lead to undetected market abuse and an inability to monitor for systemic risks.

This year, just 65% were confident in the quality of their own reports, down from 87% in 2021.

The report warned that a lack of transparency would  not only cause mistakes and potential systemic risk,  but also pose significant financial, reputational and compliance risks for reporting firms.

The findings come 10 months after REGIS-TR, the EU’s second-largest trade repository (TR), was fined €186,000 for eight breaches of EMIR for failing to provide “direct and immediate access” to details for derivative contracts, as required by the regulation.

However,  ACA Group found that only 19% of firms identified trade and transaction reporting as a “top compliance” challenge for firms in 2022.

The research  is based on a survey conducted at ACA’s Regulatory Horizon virtual conference last month.

It also noted that a regulatory crackdown from the Financial Conduct Authority and ESMA was likely imminent, with ESMA’s penalty to REGIS-TR indicating a continued focus on data quality.

“It is good to see a downturn in the overconfidence that so concerned us in last year’s report. But there remains a dangerous lack of understanding or prioritisation around the current processes required to meet MiFIR/EMIR standards,” says Matt Chapman, managing director and co-lead of the ACA’s regulatory reporting monitoring and assurance (ARRMA) service at ACA Group. .

He adds: “The longer it takes firms to realise they have a problem, the more expensive and time consuming it becomes to fix, and the more embarrassing the conversation with the regulator becomes.”

Charlotte Longman, director and co-lead of the ARRMA Service, says, “It is no surprise that regulators are not happy — they are not receiving the data they need to successfully identify market abuse and monitor for systemic risk in the derivatives market.

She adds: “If firms want to avoid fines for non-compliance, they need to urgently review and rework their data and compliance processes, including their exception management programme, and implement close, ongoing transaction monitoring. It sounds overwhelming but there are tools out there to help.”

©Markets Media Europe 2022

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