Navigating Regulatory Challenges: FCA’s Market Watch
The financial landscape’s regulatory terrain remains intricate and ever-evolving. The Financial Conduct Authority (FCA) continues its vigilance against common transaction reporting errors through its latest newsletter, Market Watch 74. This edition stands out not only for addressing known issues but also for shedding light on previously unexplored concerns, offering a comprehensive guide to compliance.
Market Watch Insights: Beyond Familiar Ground
Market Watch 74 is a treasure trove of insights, directing attention to recurring transaction reporting errors. This edition is unique in that it delves into both established and novel issues, aiming to elevate firms’ compliance practices.
Enhanced Data Management: MDP’s Role
Despite an annual rise in firms accessing data from the Market Data Processor (MDP), the FCA deems it vital to remind them of their legal duty to align their records with MDP data. Interestingly, the FCA has reached out to firms that haven’t reconciled their data, underlining the necessity of compliance. While not all EU National Competent Authorities (NCAs) follow the FCA’s approach, the importance of harmonizing front office records with the most current data is paramount, regardless of whether it’s sourced from the Approved Reporting Mechanism (ARM) or NCA.
Tackling Persisting Challenges: A Tale of Errors
A surprising dip in firms raising errors and omission forms, despite increased access to MDP data, contrasts with the reality, where persistent issues from the MIFIR go-live in 2018 demand costly replay exercises. This incongruity underscores the complexity of achieving comprehensive data accuracy.
Clarifying Reporting Entities: IDM and EDM
The Identification of Investment Decision Maker (IDM) and Execution Decision Maker (EDM) has long lacked definitive guidance. Addressing this void, the FCA provides clarity, suggesting these fields should encompass individuals with substantial involvement in transaction decisions.
Precision in Complex Trades: Aligning with ESMA
While ESMA guidelines on complex trades are deemed clear, the FCA emphasizes uniformity in reporting linked by a Complex Trade ID, including the same price. Moreover, adherence to ESMA guidelines remains a steadfast expectation.
Untangling Transmission Agreements: A Complex Web
The enigma of transmission agreements prompts deeper scrutiny. While legislation doesn’t prescribe a specific approach, the receiving firm’s responsibility to populate its report with data from the transmitting firm entails the latter seeking assurance that the former possesses the requisite mechanism. Firms relying on Article 4 must ensure that these provisions are evident to benefit from this regulation.
Consistency in Reporting: Price & Quantity Notation
Inconsistencies in price and quantity notation pose a challenge. ESMA/FCA validation rules provide some safeguard against common errors, with ESMA’s Data Quality Report touching on price discrepancies for CDS from a different angle.
In conclusion, the amalgamation of insights from FCA’s Market Watch 74 presents a comprehensive view of today’s regulatory landscape. As financial institutions grapple with intricate reporting nuances and brace for monumental changes, aligning practices with these insights becomes a cornerstone of effective compliance.
