Few financial institutions are ready to meet the requirements of transaction reporting under Markets in Financial Instruments Directive II (MiFID II), while many are facing ongoing challenges including understanding the regulatory requirement, sourcing required data and integrating standard data codes.
The data management challenges of MiFID II transaction reporting, approaches to compliance, and the benefits of a strategic regulatory programme were key topics in a recent A-Team Group webinar dedicated to data for transaction reporting. The webinar was one of many events in a MiFID II programme being delivered by A-Team throughout the year.
The webinar was moderated by A-Team editor Sarah Underwood and joined by Chad Giussani, head of compliance and operations at Standard Chartered Bank; David Masters, referential data coordinator at Societe Generale; David Lawlor, global head of content management at Thomson Reuters; Steve Barnes, vice president of technology at AQMetrics; and Paul Liesching, global head of financial markets at Truphone.
Setting the scene for discussion, an early audience poll showed 3% of organisations completely ready to meet the requirements of MiFID II transaction reporting, 29% somewhat ready, 36% at the planning stage, 25% starting implementation and 7% having yet to start. A second poll identified key date management challenges as understanding the regulatory requirement, sourcing required data, integrating standard data codes and working across data silos.
Considering the wider scope of MiFID II compared to MiFID, the webinar speakers noted an increase in data fields required for transaction reporting from 23 to 81, the need for all investment firms to report to National Competent Agencies either directly or using an Approved Reporting Mechanism (ARM) or trading venue, and the outstanding requirement for the European Securities and Markets Authority (ESMA) to clarify issues such as the exact definition of traded on a trading venue (TOVT).
The differences in MiFID and MiFID II data requirements were cited as coverage of pretty much all asset classes rather than only equity instruments, the need to include data on people involved in trades, and the requirement to integrate standard data codes including International Securities Identification Numbers (ISINs), Legal Entity Identifiers (LEIs) and Classification of Financial Instrument (CFI) codes.
Barnes noted that additional interfaces are needed to gather required data and warned that data siloes need to be broken down and a centralised data programme started immediately if the right data is to be available in time for MiFID II compliance on 3 January 2018. Masters touched on the challenge around the use of ISINs to identify OTC derivatives and questioned how ISINs will be sourced in a timely manner for reporting. Lawlor highlighted the fact that no LEI means no trading and a potential breakdown in workflow.
Providing a response to the webinar audience’s views on data management challenges, the speakers agreed on a need for a harmonised approach to data and a hub where data can be stored and enhanced. Taking a strategic approach to regulations such as MiFID II, Dodd-Frank and European Market Infrastructure Regulation (EMIR) should also ease the data management burden and reduce repetitive activity.
Looking at the requirement for all communications around transactions to be recorded, Liesching said firms need to develop strategies for mobile, fixed line and turret recording.
Final guidance from the speakers focussed on working with peers and regulators to get MiFID II transaction reporting right, agreeing data strategy and filling LEI gaps as soon as possible, and starting early to avoid a last-minute compliance programme that could be bigger and more expensive than expected.
Listen to the webinar to find out more about:
- MiFID II transaction reporting
- Data requirements
- Data management challenges
- Best practice approaches
- Expert guidance on compliance