On 7th November 2024, the FCA published Market Watch 81. This edition discusses "recent observations from our supervision of the UK MiFID transaction reporting regime."
Background
Based on the FCA’s findings, also discussed in Market Watch 74, more firms have taken measures to improve their transaction reporting quality.
However, there are still data quality issues which persist even after they have been identified and fixed by firms.
Summary
The FCA’s studies have shown that the reporting issues are caused by weaknesses in:
Change management
Change within organisations affects their systems and process due to poor practice, insufficient documentation, third party reliance, and staff turnover and absences have led to data quality issues.
Firms are advised to conduct business analysis, implement new systems, and develop new business and functioning requirements to help firms manage change.
Reporting process and logic design
Firms interpreting regulatory requirements to develop reporting logic which solely benefits their business model and firms having a lack of clarity in implementing the transaction reporting process causes transaction reporting issues.
Firms are advised to create clear reporting processes and logic design documents which evidences how reporting processes were previously designed to meet business/functional requirements.
Data governance
Firms gathering information from various sources, relying on inadequate data lineage documentation, using poor record keeping and having inadequate security of personal data causes errors in transaction reporting.
Firms are advised to implement effective data governance through data dictionaries and data lineage documents to limit the disconnect between data management and regulatory reporting.
Control framework
Poorly designated reconciliation processes, through reconciliations being conducted on an irregular basis and controls not evolving with the firm’s changes, creates problems in data quality.
Firms are advised to maintain a control framework involved by a firm’s end-to-end transaction reporting process.
Governance, oversight and resourcing
Deficient organisational structures, limited compliance oversight, poor risk management framework, lack of relevant management information, limited compliance oversight and a lack of accountability are examples of poor governance.
Firms are advised to introduce effective governance through management oversight and proper resourcing.
Next Steps
Firms are encouraged to continuously submit errors and omissions notifications for any issues they are aware of
The full Market Watch 81 edition can be found here - https://www.fca.org.uk/publications/newsletters/market-watch-81
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