In April this year, the CSSF has reached out to multiple IFs and has expressed significant doubts on the correctness and completeness regarding this reporting.
MiFIR - Transaction Reporting
The MiFIR Transaction Reporting (also referred to as “TRAF Reporting”) is a complete and inescapable overhaul of the previously required TAF Reporting, with up to 65 applicable reporting fields, a wide range of different values to select from and a multitude of reporting scenarios, to be managed according to an IF’s size, client base, business and trading activity.
Its complexity and wide-ranging implications on the IT landscape made Transaction Reporting a hot and cumbersome topic for any MiFID II/ MiFIR project.
The successful functioning of the reporting is not only an operational challenge, as data has to be retrieved from diverging systems, enriched and sent on to the external Approved Reporting Mechanism (“ARM”) / CSSF, but IFs also need to properly analyse the numerous dependencies on the core banking system and data service providers.
Moreover, due to inconsistencies in the application of the regulatory requirements throughout the market, some IFs still struggle on producing certain parts of the TRAF report – notably the FX-transaction reporting.
Scrutiny by CSSF
CSSF has recently reached out to multiple IFs by email, requesting explanations on identified inconsistencies within their Transaction Reporting. The CSSF has therefore requested that affected IFs re-submit all reports for this year before mid-May.
The depth and granularity of the CSSF’s institution-specific controls are very high and effective due to ESMA’s and NCAs’ increased internal automated control systems. The CSSF’s control focuses, among others, on specific reporting fields (e.g. reporting field #35 “Venue”) and asks IFs to explain and justify the content of their reports via the use of additional documentation in a timely manner.
Due to the broad scope and complexity of the reporting requirements and due to the limited time given by the CSSF, the task for IFs to react in a consistent and timely manner is challenging.
Furthermore, the level of scrutiny on this first review shows the seriousness with which the CSSF will monitor the implementation of the Transaction Reporting. It is thus to be expected that similar reviews will follow on a regular basis.
Increasing regulatory reporting linked to trading
However, IFs do not merely face the challenges posed by the Transaction Reporting but actually have to deal with a general increase in the regulatory reporting linked to trading.
Apart from MiFIR requirements, IFs have to ensure implementation of EMIR’s changing reporting requirements as well as the upcoming SFTR reporting requirements.
Similar to the Transaction Reporting, the CSSF has in the past contacted financial institutions over inconsistencies in EMIR trade reporting, underlying its commitment to a robust supervisory framework on regulatory trade reporting.
Ensuring the correctness of the regulatory reporting
With ever increasing regulatory reporting, ensuring the correctness of these reports is becoming an ever more burdensome task for financial institutions. Significant resources can be required to resolve reporting issues, both in the recalibration of the technical reporting solution and in the correction of past reporting. Confidence that the implemented reporting solution meets regulatory requirements is therefore of the essence. The most successful implementations result in low regulatory risk, high automation with minimal manual steps and long-term cost effectiveness.
To support you in your regulatory reporting, PwC offers you the following services:
(i) MiFIR Transaction Reporting re-submission for mid-May (reactive approach) – ad-hoc support in the readjustment of the existing reporting model and re-establishment of all reports for this year.
(ii) Reporting Quality Check (proactive approach) - analysis of the existing transaction reporting framework to ensure the correctness and completeness of the underlying reporting
(iii) Establishment of an internal transaction reporting governance – Support in the allocation of controls, responsibilities, and internal reporting documentation (e.g. processes, procedures, controls and internal applicability).
We have consultants who have hands-on experience in the implementation of MiFIR, EMIR and SFTR-related reporting frameworks throughout Luxembourg and who have valuable experience in dealing with IT issues that may arise and with the various service providers, ARMs and Trade Repositories (“TR”). We would be more than happy to assist you with any related difficulties.
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