EMIR Refit RTS/ITS: reporting under the new standards
The EMIR Refit technical standards (RTS and ITS) were published in the Official Journal of the EU on October 7th 2022. With the compliance date now set on 29 April 2024, counterparties will need to report under the new standards, including upgrading outstanding derivatives to the new reporting standards. Some of the key differences that the EMIR Refit package brings are: New ISO 20022 XML Data Format. Unique Product Identifier (UPI) to be used where an ISIN is unavailable. Position-level reporting will be selected over transaction level where the conditionalities of the RTS/ITS are met. Additional details and values to be included in the report regarding, collateralisation, the reporting of corporate events and the direction of the transaction etc. New data points, for example, Post Trade Risk Reduction (PTRR), events (e.g., Compression), identifiers for crypto derivatives, additional points on asset characteristics, information on delta values etc. Delegated Reporting – Report Submitting Entity (RSE) must provide the Entity Responsible for Reporting (ERR) with transparency to the records reported on their behalf, and to any data quality issues encountered. Introduction of an Errors and Omissions notification to NCAs. A new provision by ESMA, that would require the counterparties to have in place written internal procedures to resolve any reconciliation break identified by the Trade Repositories (TRs). Increase in the number of reconcilable fields to be reconciled from the date when the new RTS/ITS package begins to apply with several more fields becoming reconcilable 2 years after the go-live date. ATTENTION Valuation becomes a reconcilable field. This means that where 2 EEA counterparties to a derivative contract respectively mark-to-market the valuation amount of said contract, if those values are outside tolerance level, this field will not reconcile, and the transaction will not be matched. Trade Repositories in case of a paired report between 2 EEA counterparties that have not been reconciled (matched, field by field) will stop attempting to reconcile the derivative 30 calendar days after the derivative ceases to be outstanding. MAP FinTech is a leading award-winning global regulatory technology provider, highly regarded for its proprietary reporting technology and exceptional client-centric after-sales support. As one of the first providers in Europe to report under the European Market Infrastructure Regulation (EMIR), with billions of transactions reported successfully so far, we have built a reputation for excellence, coupled with the necessary regulatory expertise and technological innovation to assist firms in navigating their respective regulatory obligations. Contact our team of experts to find out how you can benefit from our innovative and comprehensive regulatory reporting solutions.
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.
Reducing Compliance Costs: The Value of Outsourcing Regulatory Reporting
Regulatory reporting consists of the submission of data to national competent authorities (NCAs) or authorised Trade Repositories in order to comply with the enacted regulatory provisions. Simply stated, it is the process financial services firms must follow to demonstrate compliance with the established rules. This so-called cost of compliance is materially significant and burdensome. However, the opposite is also true; the cost is even greater when it comes to non-compliance! In this article, from our experience as industry veterans, we will examine the many factors involved in the cost of compliance and determine whether a business should undertake such an enormous endeavour organically or, from a cost/benefit analysis, rely on the resources and expertise offered by a third-party. Going at It Alone: What Should You Consider? Below are some points companies must consider when deciding whether they should self-report or opt for a third-party solution. Technology & Implementation: Start-up costs Hardware Software (proprietary or licensed) Extraction and consolidation of data of various formats from multiple sources with the interpretation of regulatory complex requirements/fields Connection fees (direct data submission to NCA (where applicable)) Development team and support Hosting Regulatory Compliance: Multi-jurisdictions (if applicable) Technical standards requiring deep-dive analysis and comprehension Monitoring and reconciliation Staying up-to-date with amending reporting requirements Reporting: The higher costs associated with direct reporting to a Trade Repository (TR) as opposed to the cost savings available through the synergies and where applicable (aggregation) offered via a trusted third-party provider. Human Capital: Cost of employing experienced professionals Required continued training The above is not exhaustive but provides a high-level overview of the many factors to consider when studying the cost of compliance. Fortunately, there are many solutions available that allow financial institutions to free up capital and resources and concentrate on their core business. Most importantly, by utilising an established third-party vendor, one that has specific regulatory reporting expertise, the required capital investment in infrastructure, and supplementary dedicated support, financial institutions may benefit from the inherited synergies and economies of scale offered by such a large specialist provider as opposed to going solo and self-reporting. As Malcolm Gladwell discusses in his bestseller, Outliers, “to become an expert it takes 10,000 hours (or approximately 5 years full-time work) of deliberate practice with an eye on mastery.” With the ever-changing regulatory landscape, it is important to be mindful of the inherent risks and ever-present pitfalls that can plague non-discerning participants. Utilising a professional service provider can help navigate through this cumbersome process. The real cost of compliance is the price of admission. As discussed above, an in-house solution should not be taken lightly. Whereas, when considering the options available, outsourcing offers a lot more for less. Leverage the Power of RegTech with MAP FinTech MAP FinTech is highly regarded for its regulatory technology (RegTech) and services innovation. We help clients push the boundaries of what’s possible in regulatory technology, delivering deep expertise and innovative solutions. All our solutions are offered under our award-winning Polaris Platform, which provides our clients with peace of mind and allows them to concentrate on what they do best. Our services are bundled with solutions from some of the biggest vendors in the market, ensuring quality service. At the same time, we cover our clients’ regulatory reporting needs via our compliance expertise. This solution has been developed in-house, which provides our clients with complete control of the entire reporting process—from data sourcing to validations, enhancements, generation and submission of the reports, and receival and presentation of feedback, all via a user-friendly portal. It also delivers unparalleled flexibility to quickly adapt to new and evolving regulations and the highly dynamic regulatory environment. Matching this adaptability with our unwavering commitment to customer service and innovation has allowed us to be one step ahead of the competition. Finally, the platform works with existing systems, so there is no need for the user to adopt new technology. Data is extracted from the client through DB extraction or is pushed by the client to our side within CSV files over SFTP. Contact our team of experts for more information and a demo of our award-winning Polaris Platform.
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