Virtual Power Purchase Agreements – EMIR (EU/UK)
As the global focus on reducing carbon emissions and the transition towards renewable energy sources, Virtual Power Purchase Agreements (VPPAs) or Financial Power Purchase Agreements (FPPAs) have emerged as a mechanism for companies aiming to meet sustainability targets and mitigate energy price volatility. This blog explores these instruments, their regulatory reporting obligations, and how MAP FinTech can assist clients in navigating this complex landscape What Are Virtual Power Purchase Agreements A Virtual Power Purchase Agreement is a formal multiyear agreement between an energy producer and a consumer (corporate), for the sale of electricity at a prefixed price. Unlike physical power purchase agreements, there is no physical delivery of electricity, but the contract is financially settled. I.e., the energy producer (seller) supplies its electricity output to the electricity grid and the consumer’s (buyer) supply of electricity is independent from the VPPA. The financial settlement process may differ from VPPA to VPPA, but the most common form is as follows. The Parties to the contract agree that each billing cycle, if the fixed price is above the prevailing market price for electricity (as published by a third party such as power exchanges like Nord Pool) the seller (energy producer) will pay to the buyer (consumer) the difference between fixed contract price and prevailing market price (adjusted for the output as defined in the contract). If the prevailing market price is above the contract fixed price, the buyer (consumer) will pay the difference to the seller (energy producer). Moreover, in several VPPAs the energy producer will deliver to the consumer a so-called Energy Attribute Certificate (EAC). The said EAC is evidence that the energy the consumer bought comes from renewable sources. EACs are tradeable and transferable in many jurisdictions, as countries from around the world are scrambling to offer incentives towards transitioning to clean energy sources. As such, the consumer may also stand to gain from trading EACs obtained under the VPPA. EACs come in many flavours such as the EU’s Guarantee of Origin (GoOs) harmonising the EAC system of EU member states, the US’s Renewable Energy Certificates (RECs) and the UK’s Renewable Obligation Certificates (ROCs). Finally, it is worth noting that the financial settlement process of the VPPA allows for such contracts to be cross-border, e.g. the producer may be established in a different country than the consumer. Why are Virtual Power Purchase Agreements subject to EMIR reporting As we have analysed in the previous paragraph VPPAs are complex, usually long-term commodity (electricity) contracts which are financially settled. Therefore, such contracts fall under the perimeter of a derivative financial instrument. Moreover, given the bilateral nature of such contracts these are OTC unlisted and, in most cases, uncleared (by Central Clearing Counterparty) derivatives. Additionally, depending on the terms of the agreement, VPPAs may have the characteristics of a forward , a contract for difference, a swap, or even a swaption. Considering all of the above, the said contracts fall under the scope of the EU’s and/or the UK’s EMIR rules that capture all derivative financial products. As such, both the energy producer and the consumer, upon entering a VPPA become subject to the provisions of EMIR which include, inter-alia, a reporting obligation. How can MAP FinTech assist At MAP FinTech we understand that in many cases producers and consumers cannot set up by themselves the necessary processes for EMIR reporting, as such, we offer various options for parties to a VPPA including a service whereby, we take upon ourselves to: Analysing the VPPA agreement, either bespoke contracts or standardised master agreements (e.g. ISDA, EFET) in order to identify the commercial aspects. Mapping the commercial aspects of the VPPA to the values required under EMIR. Enriching the EMIR report with other requisite data such as interconnection points, delivery zones, electricity load types. Creating and submitting reports on behalf of such clients to an EU or a UK Trade Repository. Providing the end client with the relevant files (e.g. TR responses, submitted files) for their records. Contact our team of experts for more information or any assistance you may require.
FCA Discussion Paper – Improving the UK transaction reporting regime
As we have already noted in a previous blog post, with the departure of the UK from the EU, it was expected that at some point the transaction reporting regimes of both jurisdictions would begin to diverge. Now it appears that this process is picking up steam, as the FCA and ESMA are consulting for changes to the MiFIR transaction reporting regime. See our blog post on ESMA’s MiFIR consultation here. On the 15th of November 2024 the FCA published a discussion paper proposing changes to the aforesaid transaction regime. MAP FinTech has already drafted its responses and intends to submit its views to the FCA’s consultation. The FCA is considering the inclusion of additional fields, but the Authority has not provided an exhaustive list for the new inclusions, nevertheless MAP FinTech understands that the proposals as set forth by the FCA imply that any new additions will be less than what ESMA is proposing. See below a non-exhaustive list of changes that FCA is proposing to make. AIFMs and UCITS Management Companies to become subject to the MiFIR reporting requirements UK AIFMS and UCITS Management companies that offer the non-core services of the management of portfolios of investments in accordance with mandates given by investors on a discretionary client-by-client basis, investment advice; safe-keeping and administration in relation to shares or units of collective investment undertakings; and reception and transmission of orders in relation to financial instruments. Will be required to submit MiFIR transaction reports in relation to the aforesaid services if they trigger a MiFIR transaction obligation. Including the UPI for instruments of UK MiFIR Articles 26(2)(b) and 26(2)(b) The FCA is considering to mandate the inclusion of the UPI for securities captured by the UK MiFIR reporting obligation and may be issued with a UPI, refer to our blog post on the UPI for an overview. Alternatively the FCA is considering the implementation of a modified version of the UPI (UPI+). New Identifiers for Distributed Ledger Technology – DLT securities and for securities whose underlying assets are crypto-assets The FCA is proposing to adopt ISO 24165 Digital Token Identifier standard for DLT securities and underlying financial instruments to identify tokenised securities or similar. For a brief overview of the ISO refer to our earlier blog on ANNA-DSB’s adoption of DTIF codes for derivatives on crypto assets. If the FCA’s proposal is accepted firms that trade with DLT securities or securities whose underlying are crypto assets and under the assumption that the aforesaid securities are captured by the MiFIR reporting obligation, reporting firms will need to source the aforementioned ISO code. Reporting client/counterparty categories The FCA proposes the addition of a new field that will capture the category of the clients/counterparty. The said field will be allowed 2 values – Retail Client, Professional. For every trade where the firm submits a report it will need to assign a category to its counterparty in accordance with the aforementioned. Reducing reporting costs for small firms and request for feedback to remove duplication with other reporting regimes The FCA has asked for feedback on steps it could take to remove duplication with other reporting regimes e.g. a firm reporting a MiFIR captured derivative is always required to report it under EMIR as well. Moreover the FCA recognises that some small firms who are infrequently captured by the MiFIR reporting obligation are finding it difficult and costly to comply with the reporting regime. The FCA has requested feedback on how to alleviate the burden on small firms. Request for Feedback on messaging standards/new technologies The FCA is asking from respondents to provide feedback on whether new technologies or alternative messaging standards could improve transaction reporting. The FCA provided as an example of these alternative messaging standards the JSON format. The Consultation paper contains many more proposed amendments to MiFIR’s reporting requirements. The FCA is accepting feedback from market stakeholders till the 14th of February 2025. How can MAP FinTech Assist MiFIR Transaction Reporting is our service that allows clients to report their transactions in Financial Instruments as per the requirements of the Markets in Financial Instruments Regulation (MiFIR, Article 26) to the National Competent Authority (NCA), either directly or through an Approved Reporting Mechanism (ARM). Transaction data received on our Polaris Platform is processed, enhanced, validated and subsequently submitted in the format prescribed by each NCA. Contact our team of experts for more information or any assistance you may require.
ESMA Consultation Paper – Review of RTS 22 on transaction data reporting under Art. 26 and RTS 24 on order book data to be maintained under Art. 25 of MiFIR
As we have already noted in a previous blog post, with the departure of the UK from the EU, it was expected that at some point the transaction reporting regimes of both jurisdictions would begin to diverge. Now it appears that this process is picking up steam, as the FCA and ESMA are consulting for changes to their respective MiFIR transaction reporting regime. The FCA is also consulting on changes to its MiFIR reporting regime, see our blog post here. On the 3rd of October 2024 ESMA published a consultation paper proposing changes to the aforesaid transaction regime. MAP FinTech has already drafted its responses and intends to submit its views to ESMA’s consultation. See below a non-exhaustive list of changes that ESMA is proposing. Increase the total number of reportable data points by 48 new values and renaming existing data points ESMA is proposing to include additional fields that in some cases aim to better align MiFIR with other reporting regimes such as EMIR Refit. To this end, ESMA is proposing to include data points such as: Option Premium, Receiver of Leg1/2, Floating Rate, Spreads, Effective date, Reference period of the floating rate, Term of floating rate. These fields are fields EMIR reporting entities are familiar with, as ESMA is proposing to align (to the extent possible) MiFIR with EMIR reporting. MAP FinTech notes that not all 48 data points will be applicable to all trading scenarios. Further to the above ESMA is also proposing to change the definition and/or naming of some data points to align with the definitions/naming given under either SFTR or EMIR. Identifiers linking all transactions in off-exchange trading For any off-venue transaction ESMA is proposing the inclusion of a new field, the Transaction Identification Code (TIC). If ESMA’s proposals are accepted, all firms in a transmission chain will be required to report the same TIC code, liking all reports. For Example assume a chain where the Client submits an order to Broker1 then Broker1 further submits the order to Broker2 then Broker2 to Broker3 and so on. Each of the aforesaid Brokers if they have a MiFIR reporting obligation in the EU will be required to report the same TIC in their respective reports. ESMA proposes that the “Market Facing” firm should be the firm responsible for the TIC’s generation and dissemination further down in the transmission chain. Moreover ESMA is also proposing to standardise the TIC which will consist of elements such as Instrument Identifier, Date Time, LEI of generating entity. New Identifiers for Distributed Ledger Technology – DLT securities and for securities whose underlying assets are crypto-assets ESMA is proposing to adopt ISO 24165 Digital Token Identifier standard for DLT securities and underlying financial instruments to identify tokenised securities or similar. For a brief overview of the ISO refer to our earlier blog on ANNA-DSB’s adoption of DTIF codes for derivatives on crypto assets. Should ESMA’s proposal be accepted firms that trade with DLT securities or securities whose underlying are crypto assets and under the assumption that the aforesaid securities are captured by the MiFIR reporting obligation, reporting firms will need to source the aforementioned ISO code. Extending Art.4 of RTS 22 to include firms trading on Dealing on Own Account Under the current RTS 22 regime, firms trading under trading capacity DEAL cannot make use of the reporting exemption afforded under Article 4 of RTS 22. ESMA proposes extend the applicability of Art.4 to such firms. Reporting client/counterparty categories ESMA proposes the addition of a new field that will capture the category of the clients/counterparty. The said field will be allowed 4 values – Retail Client, Elective Professional Client, Professional Client and Eligible Counterparty. For every trade where the firm submits a report it will need to assign a category to its counterparty/client in accordance with the aforementioned. Proposal to switch from XML to JSON ESMA is requesting feedback on the issue of switching MiFIR reporting format from XML to JSON. As per the consultation paper ESMA is considering the gradual switch of various reporting regimes from an XML format to JSON. ESMA is asking respondents for their views on the proposed switch, including indications on costs, timelines of implementation and potential benefits. The Consultation paper contains many more proposed amendments to MiFIR’s reporting requirements. ESMA is accepting feedback from market stakeholders till the 17th of January 2025. Once the consultation phase ends, ESMA will proceed to analyse the responses and adjust the proposals accordingly, then it will submit the amended RTS for approval by the EU commission. How can MAP FinTech Assist MiFIR Transaction Reporting is our service that allows clients to report their transactions in Financial Instruments as per the requirements of the Markets in Financial Instruments Regulation (MiFIR, Article 26) to the National Competent Authority (NCA), either directly or through an Approved Reporting Mechanism (ARM). Transaction data received on our Polaris Platform is processed, enhanced, validated and subsequently submitted in the format prescribed by each NCA. Contact our team of experts for more information or any assistance you may require.
Additional Instruments Captured by updated EU MiFIR – an overview
Instruments captured by EU MiFIR reporting, divergence from UK MiFIR requirements With the departure of the UK from the EU it was expected that at some point, the EU and the UK regulatory regimes will start diverging. With Regulation 2024/791 amending MiFIR, the EU has introduced new asset classes which are now captured by the MiFIR reporting obligation. The amended rules came into effect on the 28th of March 2024. The new instruments captured under EU-MiFIR are not, currently, subject to the UK’s MiFIR reporting obligation. As per the amended MiFIR, the obligation to report transactions (Article 26.2) has been amended and applies as follows: financial instruments which are admitted to trading or traded on a trading venue or for which a request for admission to trading has been made, irrespective of whether such transactions are carried out on the trading venue, with the exception of transactions in OTC derivatives other than those referred in Article 8a(2), to which the obligation shall apply only when carried out on a trading venue; financial instruments where the underlying is a financial instrument that is traded on a trading venue, irrespective of whether such transactions are carried out on the trading venue; financial instruments where the underlying is an index or a basket composed of financial instruments that are traded on a trading venue, irrespective of whether such transactions are carried out on the trading venue; OTC derivatives as referred to in Article 8a(2), irrespective of whether such transactions are carried out on the trading venue. While points (a) through to (c) introduce nothing new, the inclusion of (d) adds 2 additional types of OTC derivatives. Types of instruments captured by the new MiFIR reporting obligation As per Article 8a(2) of EU MiFIR the following types of instruments denominated in EUR, JPY, USD or GBP are now captured by the MiFIR reporting obligation. Type 1: OTC derivatives declared by the EU as subject to the clearing obligation under EMIR, and where those derivatives are interest rate derivatives have specific tenors (years till maturity); Type 2: OTC derivatives – Credit Default Swaps that reference a Global Systematically Important Bank (G-SIB) and that are centrally cleared or, that reference an index comprising G-SIBs and that are centrally cleared. For illustration purposes, please see below select Asset Class and Instruments captured (indicative and non-exhaustive). [table id=8 /] For the list of G-SIBs, refer to the Financial Stability Board (FSB) as of November 2023. For the instruments subject to clearing, under EU EMIR, refer to ESMA’s registry section 1.1. *Disclaimer the above is for information purposes only. For an up-to-date list of instruments captured consult with the applicable regulation, lists of instruments subject to clearing, FSB announcements and your compliance risk management teams. How is MAP FinTech going to assist Our MiFIR Transaction Reporting service allows clients to seamlessly report their transactions in Financial Instruments as required by the Markets in Financial Instruments Regulation (MiFIR, Article 26). Clients can report to National Competent Authorities either directly or through an Approved Reporting Mechanism using our award-winning Polaris Platform. Transaction data is seamlessly processed, validated, and submitted in the required format through our fully automated service. Solution includes consolidated data feeds, automatic checks, a robust reconciliation engine and continuous regulatory updates. Clients enjoy optimised technology, cost savings, expert training, and transparent monitoring of their reporting via the Polaris dashboard. For more information or to schedule a demo, please contact our team of experts.
Key points from FCA’s market Watch – How MAP FinTech may assist
On the 3rd of October 2022, the UK’s FCA issued Market Watch No 70 focusing on MiFIR transaction reporting issues. The FCA identified several areas of concern including: The proper reconciliation of trading records with data held by the regulator. Promptly notifying the FCA of an error or omission within a transaction report. In determining the meaning of ‘execution’, UK branches of third-country investment firms must consider additional criteria and not rely solely on the geographic location of a trader. Misuse of the ‘INTC’ reporting convention. Firms are reporting a market identifier code (MIC) when transmitting an order to an executing broker who then executes the transaction on a trading venue. The venue field should be populated ‘XOFF’ by investment firms that are in a chain and do not access the venue directly. In the case of transactions executed in financial instruments that are not admitted to trading or traded on a trading venue (e.g., CFDs), the instrument’s reported name should contain a clear description of the financial instrument traded (e.g., Vodafone CFD). We at MAP Fintech, a pioneer in providing software as a service solutions, have created a platform that provides MiFIR (both EU and UK) obliged entities with a powerful automation tool that creates and submits timely, accurate, and complete transaction reports. The Polaris Platform is geared towards firms with demanding reporting schedules that require a one-stop shop for their reporting needs. Moreover, the platform is supported by a dedicated support team that can help with technical (e.g., platform integration), as well as compliance queries. As such, we can assist firms to safely navigate the regulatory regime and avoid pitfalls such as the ones identified above by the FCA. Finally, our team can perform in-depth health checks on your current reporting setup to identify any shortfalls and suggest the appropriate remediation measures to ensure ongoing compliance. Contact our team of experts here.
EMIR/MiFIR Efficient Transaction Reporting Monitoring: What Does Your Organisation Need to Do?
Did you know your transaction reporting obligations don’t end when the necessary information has been submitted to the authorities? Besides providing the relevant data, you still need to confirm that the transaction reporting occurred in a timely and accurate manner as it’s required by the regulation. This, in turn, raises another crucial question: What exactly does “timely and accurate” mean, and how does this play a role in the efficient monitoring process? Timeliness of Reporting Generally speaking, Transaction Reporting must be done on a T+1 basis. T+1 means that the reporting must take place by the end of the next (local) business day from the execution of the transaction. To achieve this, you need to ensure that: Any reporting data is provided at a designated time that is agreed with the Competent Authority (CA) /Service Provider (SP). Processing of the data from the CA/SP is performed on time so that you may have enough time to react in case of negative feedback. Any resubmissions that need to be done must be submitted as early as possible. The above steps will ensure that you have reported and handled any rejections within T+1 and, ideally, within your working hours. Data Accuracy Accurate data is critical when it comes to reporting. The obligation is not only to carry out the reporting (i.e. submit the data to the authorities) but to do it in the right way. Therefore, it is important to automate this process as much as possible. The less human intervention applied to the data, the fewer potential mistakes that might occur. Monitoring of the Reporting When the reporting has been performed, it would be prudent to perform, on a daily basis, a reconciliation that follows some specific checks. Then, a more in-depth reconciliation should be carried out on a weekly or monthly basis. Daily reconciliation should be performed once the reporting has been finalised and, ideally, you should check on the following: The timeliness of the reporting. Has the reporting been done within T+1? The number of transactions reported. Does the number match the number of transactions in the trading system? Ideally, you should also check the number of different reporting messages (new, termination, modification, valuation, etc.) vs the relevant actions on the trading system (openings, closings, modifications, transactions that remained open overnight, etc.) If any rejections have been received, you need to take corrective measures within the day to meet your T+1 obligations. Weekly or monthly reconciliation will allow you to go deeper into the reporting process and identify possible errors. This process would include the following: Performing a health check of the process you have in place, mainly on the data extraction. This will ensure that the data is provided on time and that you do not have any unexpected or unattended internal issues. Checking that the source data provided to the service provider or used for reporting is accurate and in line with your trading setup. Some core fields you could check are price, execution time (in UTC), notional amount, counterparties, and side of the trade (buy or sell). Making sure that procedures are up to date when it comes to adding new financial instruments in your trading setup and, subsequently, to your reporting, and that you avoid underreporting or overreporting. This also relates to any new clients, especially NFCs within EEA and other broker clients that need to be identified within the reporting using their corresponding LEIs. Performing reconciliation in case you delegated your reporting to other counterparties to make sure that the transactions they report on your behalf are in line with what you have in your trading system, as well as the data reported is accurate. All of the above assist in the efficient monitoring of your transaction reporting. The sequence in which you perform these steps depends solely on your own preferences. However, you need to keep in mind that this process is critical in making sure that you have met all your reporting obligations. Monitoring is an ongoing process and, given the latest Data Quality Reviews performed by the regulators, ensuring that all goes well is of paramount importance. To achieve this, a structured monitoring process must be in place. MAP FinTech is one of the earliest innovators in the RegTech space, being highly regarded for its Regulatory Transaction Reporting Technology and exceptional client-centric after-sales support. If you are having difficulty implementing the above, you can contact our team of experts here.
How Can We Maximise Regulatory Technology & Avoid Its Potential Pitfalls? What recent results from the European Banking Authority and ESMA reports show
The European Banking Authority (EBA) has recently published an analysis looking into the RegTech landscape in the EU. The report assesses the many benefits, challenges and risks of the use of RegTech in the EU and lays out the steps to be taken to support the sound adoption and scale-up of solutions in this sector. The study also proposes actions designed to enhance the knowledge and skills of the competent authorities (CAs). ESMA has also published a report on Trends, Risks and Vulnerabilities of the Financial sector dedicating a part on RegTech and SupTech and the change for Markets and authorities. This report highlights that market participants are increasingly using new automated tools in a variety of areas, while potential applications of new tools for regulators include greater surveillance capacity and improved data collection and management. When technology is used for compliance, it is called Regulatory Technology or ‘RegTech’. Regtech is defined as any range of applications of technology‐enabled innovation for regulatory, compliance and reporting requirements implemented by a regulated institution – with or without the assistance of RegTech provider. RegTech solutions in Financial Institutions (FIs) and Investment Firms (FI’s) are currently evident in: Anti-Money-Laundering and Countering the Financing of Terrorism (AML/CFT) – for example, providing solutions for sanction screening or remote onboarding of customers. Fraud prevention – through automated behaviour and transaction monitoring. Prudential reporting – supporting institutions in their regulatory submissions. ICT security – providing detection mechanisms for an institution’s operations security. Creditworthiness assessments – providing new capabilities for assessing the creditworthiness of clients. Regulatory Reporting – supporting institutions in their trade reporting. Risk Management Benefits According to financial organisations using RegTech solutions, their key benefits are improved risk management, better monitoring and sample capabilities, and a reduction in human error. At the same time, RegTech providers place heavy emphasis on their ability to increase efficiency and effectiveness and quell the impact of ongoing regulatory change. Some of the increasing disparities in perspective between financial institutions (FIs) and RegTech providers suggest that further research of the benefits afforded by RegTech solutions is required. ESMA also believes that the move towards a more data-driven and pro-active approach will enhance monitoring of the financial sector and help ensure better outcomes for market participants and consumers. The continual push for efficiencies and cost savings, particularly for back-end and legacy systems as well as for labour-intensive processes will increase the use of RegTech in the foreseeable future. Risks EBA highlighted that when not implemented correctly, RegTech solutions may also generate risks for FIs that would need to be identified, monitored and managed. These risks may relate to, for example, compliance, concentration, business continuity, ICT and security, reputational issues, internal governance, conduct and consumer protection, and/or technology. RegTech may also create new risks for CAs supervising FIs. These include potential difficulties in assessing the effectiveness and reliability of the technological solutions used by FIs, and a potential lack of skills and tools needed to supervise the use of technology enabled RegTech solutions and, say, audit the underlying algorithms. ESMA focused on the risks and challenges for regulators and market participants in the areas of data collection and management, digital transition and failure on the part of market participants to adapt to the new digitalised infrastructure and the need from regulators to invest in the technological tools and human skills that will allow them to effectively analyse the results, operational risks and the risks from strategic incentives such as developing expertise in RegTech. Challenges The EBA report suggests that the majority of challenges to RegTech market development involve internal factors within the FIs and providers. Likewise, ESMA considers most of those challenges to apply for FIs. However, a lack of common regulatory standards across the EU could also constitute a barrier to the wider market adoption of RegTech solutions. The main challenges from the FI perspective are summarısed as follows: Data-related challenges and cybersecurity threats: FIs often indicate data quality, data privacy and protection, lack of data integration, data availability, and lack of data standardisation and harmonisation as issues. Interoperability and integration with the existing legacy systems: FI legacy systems and processes have too many silos, making RegTech adoption difficult, and this is further compounded by doubts about the ICT capacity of FIs to support FinTech, RegTech, and InsurTech solutions. Changes to regulation: changes with national or international regulations and other regulatory challenges can be another key barrier to RegTech adoption. Costs and procurement process: RegTech solutions seen as part of compliance and usually treated as a back‐office function may be at risk of underinvestment. Lack of necessary skills and training: when working with either in‐house or external RegTech solutions, FIs need specialists, e.g. data scientists and engineers, to be able, where relevant, to scout, assess, operate, and maintain updated RegTech solutions. Perceived immaturity of RegTech providers’ solutions: FIs that see RegTech as a potential competitive advantage often cite the lack of available and mature RegTech solutions as a challenge. Challenges from the RegTech provider perspective include: Lack of technological capabilities – the lack of some clients API capabilities and lack of standardisation are perceived as obstacles for technical integration. Security, data privacy and protection issues – privacy regulation may be one of the key constrains for FIs from sharing datasets with RegTech providers. Changes of national and international regulation – complex and continuously evolving regulatory landscape is perceived as a challenge, in particular on prudential reporting, fraud prevention and AML/CFT. Cost of user acquisition – a challenge, especially for recently established and smaller RegTech providers. Lack of FI understanding of RegTech solutions –it appears to RegTech providers that FIs may not be fully aware of all advantages that RegTech solutions may bring. Lack of harmonised legal and regulatory requirements – RegTech providers perceive the lack of harmonisation of regulatory requirements across the EU and the lack of regulatory data standards to be obstacles for wider market adoption of RegTech solutions. Clarity of regulatory/supervisory guidance – RegTech providers consider the lack of regulatory/supervisory
FinTech presents extensive opportunities for firms in the future, Thomson Reuters survey shows
Can corporate governance and the culture of financial services firms keep up with the pace of growth of regulatory technology? During the past several years, regulators have invested heavily in technology to protect and monitor regulatory reporting data quality. The main challenges for 2021 will focus on new regulations, preparing for those with effective dates this year and those that are going through the legislation, proposal and comment processes. This leaves financial services firms with no option but to address automated reporting as a way of validating all data submitted to regulators, detecting and correcting data issues as they arise, and setting up an overall data governance framework across different regulatory reporting requirements. Thus, Regulatory Technology (RegTech) is crucial for operational management and strategic decision-making for both the risk and compliance functions as it is designed to help firms understand and meet legal requirements more effectively and efficiently. According to Thomson Reuters Regulatory Intelligence’s 2020 annual survey report “RegTech and the role of compliance in 2021”, despite firms facing several budget challenges during the pandemic, the adoption and implementation of regulatory technology has taken a huge step forward with 70% of the surveyed firms reporting that COVID-19 increased their reliance on technological solutions. The study, which shares the experiences of more than 400 compliance and risk practitioners, found that this sector’s growth is expected to accelerate in the coming months and years. Firms and their customers are realising the great value of adopting a wide variety of Fintech solutions. The survey also shows that firms must be careful to deploy solutions on solid foundations. This means getting corporate governance right. A quarter of respondents said that corporate boards and the risk and compliance functions need to be more involved in finding and adopting Fintech solutions for the firm, highlighting the absence of appropriate skill sets as one reason for this lack of involvement. Moreover, RegTech applications continue to provide popular, embedded solutions for firms in areas such as compliance monitoring, financial crime, AML/CTF, sanctions and regulatory reporting. Budgets are predicted to increase with a mix of in-house and external solutions as the option most frequently selected by respondents. Interestingly, just 16% of firms reported they had implemented RegTech solutions, with a further 34% stating that RegTech solutions were affecting the management of compliance. Notably, the report identifies a shift from build to buy; firms that employ inhouse solutions fell to 6% in 2020 from 17% in 2019, while 12% reported that all of their RegTech solutions were developed externally. Why choose MAP FinTech to be your regulatory technology partner? MAP FinTech is a leading and award-winning regulatory technology provider for the financial services industry, specialising in reporting solutions arising from the requirements of a number of complex and challenging international regulations such as EMIR, MiFID II/MiFIR, SFTR, FATCA, DAC6 and CRS. MAP FinTech also provides innovative and comprehensive solutions for Best Execution Monitoring, RTS 27/28 Reporting, AML Transaction Monitoring and Screening, Trade Surveillance (Market Abuse), and eKYC (Screening, eIDV, Document Authentication). Industry Pioneers MAP FinTech was one of the first providers in Europe to report under the European Market Infrastructure Regulation (EMIR) with 1.5 billion+ transactions successfully submitted since February 2014. The company currently supports over 170 B2B global clients, having been recognised for the Best RegTech Reporting Solution for 2019 by Finance Magnates London and named as one of the 100 most innovative RegTech companies in the world for 2020 and 2021 by RegTech Analyst. LSE-listed brokers, including some of the biggest CFD brokers in the world, currently use MAP FinTech’s innovative solutions. RegTech Experts MAP FinTech is not just a technology company that develops software to help clients report. At the core of its offerings lies compliance. MAP FinTech provides quality assurance that the reporting obligations are correctly covered in terms of data quality. If the need arises, the firm can also directly support businesses before any national competent authority without needing any external third-party advisory or assistance. MAP FinTech can directly and uninterruptedly report to a number of EU national competent authorities. MAP FinTech’s products have been repeatedly tested and passed several rigorous reviews by EU regulatory authorities, providing full transparency for both clients and EU national competent authorities. Moreover, the company offers financial institutions the unique facility to comply with a firm’s reporting obligations before the regulatory authorities, carry out audit trails, and conduct their own reconciliations. MAP FinTech has managed to successfully and innovatively combine the compliance and technology functions with both of its teams working in close unison. This allows the company to be flexible, efficient and effective in supporting the many new, demanding and dynamic requirements of the global RegTech world.. The team’s combined expertise underpins the company’s success in providing targeted solutions to its clients and addressing their reporting needs across a diverse regulatory landscape. One-Stop RegTech Provider MAP FinTech’s solutions are all delivered under the Polaris Platform, the company’s single and powerful RegTech tool. Besides transaction reporting, the Polaris platform combines, under a single unit interface, unique solutions such as Market Abuse Surveillance, AML Transaction Monitoring, Best Execution Monitoring, RTS reports and CRS/FATCA reporting, among others. This allows MAP FinTech to package its offerings to its clients by reducing direct and indirect costs, maintain a single point of contact for support and access to the system, and avoid the need of multiple integrations with various vendors, thus saving clients both time and resources. Impeccable Support Services MAP FinTech’s dedicated and experienced support team specialises in regulatory reporting, providing continuous support on what is needed to master transaction reporting requirements. This starts from the onboarding phase and covers the whole process up until the initiation of the live reporting, the handover of the platform to the client, and ongoing day-to-day support. Unparalleled Compliance Expertise MAP FinTech is a member of MAP S.Platis Group, a leading financial services consultancy group in the region that maintains one of the largest and most experienced teams of financial services compliance experts in the EU. This ensures that clients