Market Watch 72: FCA review quality of service from ARMs & APAs (DRSPs)

January 11, 2023

Following on from the FCA’s “Dear CEO” Letter to DRSPs (2022-05-31), the FCA have reviewed the quality of service from ARMs & APAs (DRSPs) by asking a sample of DRSP clients to feedback on their services.

The FCA have provided a summary of feedback in MW 72. Please find key points below;

Ref Topic FCA observation FCA  view
1 Connectivity 1) Clients have 2 connectivity options; API and GUI
2) Clients have had issues with support from DRSPs to resolve connectivity issues
1) DRSPs are required to have robust systems and facilities to ensure continuity
2) DRSPs should keep clients informed throughout the identification and remediation process.
3) FCA saw that DRSPs were easily contactable through multiple media, with clearly signposted and available support staff with the right knowledge and technical expertise to promptly investigate and resolve issues.
2 Data Quality 1) DRSPs are required to have systems and controls in place to prevent errors or omissions being introduced by the DRSP
2)  ARMs have typically implemented either the FCA or ESMA transaction reporting validation rules. As stated in MW 59, these validation rules are not intended to identify all errors and omissions in transaction reports.
3) APAs have interpreted “erroneous” differently (APAs required to identify trade reports that are erroneous (RTS 13, Article 10(5))).
1) ARMs to have arrangements to identify transaction reports that are incomplete or contain obvious errors caused by clients (RTS 13, Article 11(1))
2) ARMs are encouraged to implement other checks and validations beyond those set out in our validation rules
3) Observed good practice where ARMs conduct retrospective checks
4) APAs have further checks for erroneous trades than those listed in  (RTS 13, Article 10(5)).
3 Fees 1) 75%+ saw DRSPs as good value for money
2) Clients who rated value for money less favorably were predominantly firms with infrequent reporting obligations.
1) We expect DRSPs to set fees to ensure clients are getting good value for money
2) We have found good practice to be where DRSPs have an active and ongoing dialogue with all client types to get feedback on value for money and fee levels
4 Unregulated services 1) DRSP clients use unregulated DRSP ancillary services to help them meet their trade and transaction reporting obligations.
2) Not always clear to clients that they were also using unregulated ancillary services
3) Where clients had reported experiencing data quality issues in their reports, these issues were often related to unregulated ancillary DRSP services.
1) Unregulated DRSP ancillary services not covered by the DRSP regulatory framework
2) DRSP clients are exposed to the regulatory risk by using unregulated DRSP ancillary services
3) DRSP clients should perform due diligence on unregulated services their DRSP offers
4) DRSP clients should ensure their own compliance with accuracy and completeness requirements for their MiFID II post-trade regulatory reporting
5) DRSPs should distinguish group services clearly
6) Accuracy and completeness obligations are the responsibility of the client using these services
5 Barriers to switching 1) The cost of implementing a project to onboard with a new provider as the main barrier to switching DRSP.
2) client onboarding timeframes can vary significantly (48 hours to 4 month – dependent on complexity of client systems and expected reporting volumes)
3) ‘one-stop-shop’ arrangements offered by DRSPs that form part of wider groups are both an incentive to stay
4) technical infrastructure and complex interactions between IT systems as being the primary barrier to switching
1) We encourage DRSPs to review onboarding and offboarding procedures to ensure they do not cause any unnecessary friction
2) Encourage DRSPs to disclose information about their onboarding and offboarding procedures (process, timelines and costs)
6 Overall customer experience 1) Most clients surveyed were happy with the customer support they receive
2) DRSP could do more to help them prepare for upcoming regulatory changes
3) webinars hosted by their DRSP on upcoming regulatory changes useful
4) High quality customer support may not be completely consistent across clients
5) Formal complaints are not always resolved in a timely way (although rare)
1) DRSPs should resolve issues these as soon as possible
2) DRSPs should keep clients informed throughout the remediation process
3) DRSPs to have the right staff, systems, policies, and procedures to ensure they provide high quality Data Reporting Services

 

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