FIRMS STILL STRUGGLING WITH MIFID COMPLIANCE.
The survey canvassed 83 respondents across brokerages, banks, asset managers and other financial and non-financial institutions. The findings showed that a majority or 68.4% of firms had received no feedback whatsoever from regulators on transaction reporting, widely regarded as one of the more burdensome requirements under MiFID II. The remaining 31.6% said they did receive some form of feedback on transaction reports, specifically on errors such as incorrect prices in currencies, mismatches between CFI codes, and other anomalies in identifier fields for clients.European regulators are failing to provide feedback to most market participants on the quality of transaction reports submitted under MiFID II, almost two years after the rules were implemented, according to Cappitech’s second annual MiFID II and Best Execution Survey.
While none of those who received feedback from regulators on the transaction reporting have been fined for the errors, Cappitech warned leniency is unlikely to continue indefinitely and firms should “not take too much comfort” from the relaxed approach from authorities so far.
Mark Kelly, a member of the Cappitech advisory board, and author of the report suggested the reporting regime’s requirements have not yet been fully grasped. He said, “The survey results point to firms still not being fully comfortable with MiFID II reporting requirements. At the beginning of 2019, firms had told us that this year would be one of setting KPIs (key performance indicators) and reviewing data quality, but this process is clearly happening more slowly than anticipated.
He added “the use of external analysis and tools to spot problems may alleviate some of these challenges on the basis of ‘don’t mark your own homework’ which will be important as the regulators will start to impose sanctions on firms who are not managing their data appropriately.
Another worrying trend is that 61.4% of firms admitted they are not monitoring best execution, despite it being a requirement under MiFID II. Most firms said they have not implemented systematic monitoring processes while over 70% are also not using the RTS 28 reports to make trading decisions, while 56.6% said they are not reviewing RTS 28 data.
Ronen Kertis, CEO and founder of Cappitech, commented, “Firms are not fully complying with monitoring best execution requirements. They also face far-reaching challenges such as reconciliation‚ which was particularly highlighted together with not having the internal expertise to keep up with the fast-changing regulations.