ESMA: “The FCA should review, revise and overhaul its current supervisory approach to EMIR data quality”

November 7, 2019

https://www.esma.europa.eu/sites/default/files/library/esma42-111-4895_emir_data_quality_peer_review.pdf

The ESMA Data Quality Action Plan (DQAP) Board of Supervisors (BoS) have completed a peer review of 6 NCAs across Europe to assess how they are monitoring and using EMIR data.

The FCA were found to not be meeting the BoS’s expectations for data usage and analysis – they scored the worst of all 6 NCAs.

Specifically the BoS stated they were “quite concerned” and;

“the FCA as having developed an insufficient supervisory approach to EMIR data quality supervision”
“The peer review assessed the FCA supervisory approach as remedying data quality issues that are self-reported by counterparties”.
“EMIR data is siloed within the FCA’s Markets Policy Department and not embedded more widely within the organisation”
“insufficient engagement by FCA senior management on data quality issues.”
“did not identify any regular and ongoing access to TRs or analysis of data quality.”

The FCA have been requested to “focus supervisory energy and resource into these areas of EMIR data quality supervision”

What are ESMA expecting?

The BoS provide the following examples of what good practice looks like;

• Using cross data checks (e.g. use MiFIR data to identify cases of non-reporting under EMIR)
• Build an interactive dashboard to analyse key fields and identify areas of poor data quality
• Create a dedicated data driven supervision team
• Undertake on-site inspections to assess counterparties compliance with EMIR, including identifying data quality issues
• Require nomination of a dedicated person responsible for EMIR related issues
• Organising conferences, industry roundtables, publishing circulars and letters to industry and using these mediums to highlight data quality issues and areas of supervisory focus for NCAs

They expect data quality supervision requested to be;

• Regular = repeated actions with a certain frequency;
• Proactive = targeted actions triggered by an NCA’s own analysis (not a reaction from a counterparty self-reporting a breach)
• Thorough and comprehensive = supervision that should cover accuracy, completeness, consistency, timeliness and duplication
• Advanced = actions undertaken with the appropriate tools
• Well established = actions that are based on a clear methodology/structured approach approved by senior management