The FCA is looking at your transaction reporting data… are you?

The FCA reaffirmed Transaction Reporting as a key focus area through the publication of Market Watch 70. The notification contains commentary on a wide range of issues and outlines the FCA’s expectations for compliance.

Of particular concern was the indication that although firms are improving reporting data quality, “many are not conducting sufficient checks on their data”.

A summary of key highlights is available below. This article will be followed by a more detailed summary in the coming days.

An active focus on data quality

Firms are expected to access the FCA’s Market Data Processor (MDP) Entity Portal to make regular transaction reporting data extract requests, as outlined Article 15(3) of RTS 22. This is the first step in assessing data quality.

There is a material difference between the number of firms making a data extract request, and those submitting breach notifications. This, in combination with the FCA’s data quality alerts, suggest many firms are not conducting sufficient checks on their data.

When assessing this data, reconciliations should not be limited to certain fields, or to data samples that do not adequately reflect the trading scenarios and asset classes traded by a firm.

If there are issues identified, notifications sent to the FCA should be comprehensive, including adequate background to facilitate a full review of the incident and avoid unhelpful references to proprietary reporting systems or processes. The FCA observed “variable levels of information in the breach notifications” it receives.

Best practices for engaging the FCA include the provision of examples to show how a field was misreported, and how this will be corrected going forward.

What should firms do

The FCA expects firms to be actively assessing the completeness, accuracy and timeliness of their reporting. Firms should have an independent tool which can perform a full reconciliation of transaction reports back to source systems. This must cover completeness, accuracy and timeliness.

Novatus’ Transaction Reporting Analysis “TRA” tool provides a market-leading reconciliation covering 100% of fields and trades. To support rapid root cause analysis we provide full transparency of all rules and interactive management information.

It is deployed with a wide range of clients and supports both issue identification and back reporting (where required).

If you would like to discuss the reconciliation tool in more detail or how best to identify errors, manage a remediation programme or engage the FCA, please contact Francis or Matthew for more information.