Data reveals widespread errors in UK MiFIR transaction reporting

Ten per cent (383) of the 3,784 UK investmentfirms that are required to comply with MiFID II/MiFIR notified the regulator of problems with their MiFIR reporting in 2018. These statistics were released by the Financial Conduct Authority last month under a Freedom of Information Act request submitted by global advisors Duff & Phelps. A hefty 6.9 billion (6,903,129,959) transaction reports were submitted to the FCA’s market data processor in 2018. Over the same period, 1,335 transaction reporting error and omission notifications were received by the regulator.Nick Bayley, who is managing director for compliance and regulatory consulting at Duff & Phelps, commented that with the FCA’s now extensive data pool it would be able to perform more advanced data analytics than it has previously conducted with its SMARTS market surveillance technology: “It shouldn’t be any surprise that the FCA is trying to recruit data scientists to grow its capabilities in this area.”He added: “Despite the large percentage of UK investment firms which have notified the regulator of issues with their reporting, there are likely many more firms, particularly on the buy-side, that are unaware that they are reporting incorrectly. I suspect the true number of firms with reporting errors is much higher. The data also shows that many firms notified the FCA on more than one occasion, suggesting that there could be systemic issues with some firms’ reporting processes.”Incomplete or inaccurate transaction-reporting by firms means the regulator is more likely to miss instances of potential market abuse, he pointed out: “As the regulator said when announcing the recent UBS fine, ‘If firms cannot report their transactions accurately, fundamental risks arise, including the risk that market abuse may be hidden.’” And Bayley warned: “After the rush to implement MiFID II at the start of 2018, the FCA was in ‘education mode’ concerning transaction reporting and the focus was on teaching firms how to interpret the rules. What we see now is that the FCA is in ‘encouragement mode’, telling firms how they can avoid common errors. It surely cannot be too much longer before the FCA starts to transition into ‘enforcement mode’, particularly for those firms failing to make a genuine effort to meet their regulatory requirements.”