How to avoid Trading Capacity data errors in your MiFID II reporting

In our new Spotlight Series we look at some of the key MiFID II data quality issues that regulators have publicly said are important indicators for them as to whether a firm is reporting correctly.

In our first in the series we focus on Trading Capacity errors and how data accuracy alerts in UnaVista Analytics can help improve your reporting.

Why is MiFID II data accuracy vital?

Errors in your MiFID II reporting data could result in sanctions from your NCAs. The FCA, CSSF (Luxembourg) and AFM (the Netherlands) are all actively monitoring erroneous MiFID II transaction reporting data and have made public their findings.

For example, the FCA has made clear that your firm should not rely solely on the successful transmission of a transaction report to an NCA as an indication of the quality of that report. Remember, the standard validations do not capture all reporting errors.

What is the reporting issue relating to the Trading Capacity?

The FCA have put out multiple market watch notifications about how firms are incorrectly populating the trading capacity, which is easy for the regulator to spot a firm who is consistently reporting incorrectly. The most common misuse of the field are where

Specifically, this alert flags up transactions where:

  • The Executing Entity is either the Buyer or the Seller and the trading capacity is incorrectly reported as “AOTC” (Any Other Trading Capacity)
  • Where AOTC is correct, but where the Buyer / Seller is incorrectly populated

How common is this error?

From monitoring its occurrence in data submitted via UnaVista, we can see that this error impacts a high volume of transaction reports for a substantial number of reporting firms.

Increase your reporting data accuracy

Detect data accuracy anomalies and enable peer group analysis, with interactive tools and alerts in UnaVista Analytics.

How do you ensure data accuracy is maintained?

Even when your firm has resolved the problem, the IACU alert should still be monitored on an ongoing basis to monitor for situations where it an error may be reintroduced into your data.

FCA Market Watch 59

"We have further recorded firms populating buyer and seller fields inconsistently with the trading capacity field. For example, firms reporting themselves as the buyer or seller where the trading capacity is AOTC"

FCA Market Watch 65

"We previously reminded firms they should not assume a transaction report was accurate because it was accepted by the FCA. This is because our validation rules are not intended to identify all potential errors and omissions. We are reiterating this message as some firms continue to use transaction report acceptance rate as a standard for assessing the completeness and accuracy of their transaction reports"

How can UnaVista help?

UnaVista Analytics can provide the basis for or be incorporated into your control framework to help you demonstrate your efforts to comply, it can be accessed directly from your existing UnaVista application...

UnaVista Data Accuracy – IACU alert

As part of the UnaVista Analytics Data Accuracy module we have developed an alert that allows you to monitor for this issue and resolve it before the regulator challenges you.

Our ‘Incorrect Agency Capacity Usage’ (IACU) alert highlights where you may have inaccuracies in either the, Buyer, Seller or trading capacity fields

A firm can monitor this alert to gain reassurance that it is not making this error and drawing NCA attention to the quality of its reporting whilst demonstrating it has a procedure in place to actively identify errors and omissions within transaction reports. Where a firm has alerts, it can target those reports raising the alerts in the application. It can then review its interpretation of the regulations and guidance vs. its business model and determine whether it is misreporting or not.

In cases of misreporting we recommend firms follow local guidance from their NCA with the potential for regulator notification and remediation.

Disclaimer – We recommend that clients take legal and compliance advice as to the content of their transaction reports in order to validate that their interpretation and compliance with ESMA rules and guidance meets their specific circumstances and business model.

Check your MiFID II reporting accuracy with a data quality review from UnaVista Analytics

See for yourself how easy it is to detect data accuracy anomalies and enable peer group analysis, with alerts and interactive dashboards – using the new Data Accuracy module in UnaVista Analytics.

To arrange a demonstration using your own test data, complete the form and an expert UnaVista consultant will be in touch soon.