How Does Universal Regulation Relate to Transaction Reporting?
Why Does Universal Regulation Matter for Transaction Reporting?
Global financial markets operate under different regulatory frameworks, but they all require accurate and standardised transaction reporting. Universal regulation means that there is an agreed-upon set of standard identifiers used in transaction reporting to ensure market transparency, risk monitoring and investor protection.
Standard identifiers such as Legal Entity Identifiers (LEIs) and Unique Transaction Identifiers (UTIs) help regulators to track trades across jurisdictions and harmonise global reporting standards. Without this unified approach, global trade reporting could become fragmented, which could lead to compliance risks and market inefficiencies.
Key Regulatory Frameworks and Standardised Identifiers
To ensure consistent transaction reporting across global markets, regulators require firms to use standardised identifiers such as LEIs, UTIs and Unique Swap Identifiers (USIs):
USI’s used by CFTC are now deprecated and replaced by UTI’s. This change was brought in place to harmonize transaction identifiers globally.
- Markets in Financial Instruments Regulation (MiFIR) – EU: mandates LEIs for post-trade transparency under Markets in Financial Instruments Directive II (MiFID II), which ensures that firms are clearly identified in transaction reports
- European Market Infrastructure Regulation (EMIR) – EU: requires LEIs for derivatives counterparties and UTIs for reporting to trade repositories (TRs)
- Securities Financing Transactions Regulation (SFTR) – EU: utilises both LEIs and UTIs to track securities financing transactions, aiming to improve market transparency
- Commodities Future Trading Commission (CFTC) – US: previously mandated LEIs and USIs for derivatives reporting to enhance regulatory oversight, but USIs are now deprecated and replaced by UTIs to harmonise transaction identifiers globally
- Australian Securities and Investments Commission (ASIC) – Australia: requires the use of LEIs for transaction reporting to ensure market compliance
- Financial Market Infrastructure Act (FinfraG) – Switzerland: aligns with EMIR reporting standards, requiring LEIs for trade reporting
Why Standardised Identifiers are Important for Compliance
Standardised transaction reporting ensures accuracy and reduces the possibility of reporting errors when dealing with different regulatory frameworks. Identifiers like LEIs, UTIs and USIs allow regulators to effectively track trades across multiple jurisdictions which enhances market transparency and reduces the compliance risks for global firms.
Universal use of standard identifiers can help to improve operational efficiency for firms and financial institutions. By adopting standardised reporting, firms can streamline their internal processes, reduce errors and minimise the costs associated with reconciling trade data from across regulatory regimes.
As regulatory requirements become more complex, firms must ensure their reporting processes are aligned with global standards. Novatus En:ACT is the market-leading SaaS platform, built in conjunction with a major global banking group, to ensure you meet your G20 regulatory reporting obligations in an accurate, timely and complete manner.
Get in touch today to learn how we can streamline your regulatory reporting obligations.
