Regulatory compliance challenges for banks and sell-side firms

This blog highlights a discussion point from our comprehensive eBook: “Reference Data: The Essential Guide”.

It is a truth universally acknowledged that faulty reference data is, today, one of the key contributors to regulatory reporting failures. More trading venues transacting more and more instruments, more regulatory obligations to manage and data to report, and more demanding customers, make the challenge of regulatory reporting especially difficult for banks and sell-side firms in their roles as consumers, generators and distributors of financial markets data.

MiFID & EMIR reporting obligations

A senior banker once described MiFID I regulation as “peeling back the layers of an onion to reveal….a carrot”. Throw into the regulatory compliance mix MiFID II, EMIR, EMIR Refit and a host of other market transparency and anti-abuse regulatory reporting compliance obligations and the challenge of managing reference data might be likened to trying to hit a constantly moving target with one hand tied behind your back.

The EMIR refit set to go live in Europe in April 2024 (September in UK) requires ALL derivative trades to be reported to trade repositories in a standardised format, adding a lot more (74) reportable fields to EMIR-eligible transaction messages. It also imposes an ISO20022 global messaging standard on EMIR reporting, requiring it to be reported in a standardised XML structure, not the typical csv format used today.

No sign of data standardisation

It might be reasonable to assume that there is consensus and harmonisation of data standards with respect to how instruments are labelled but this is simply not (yet) the case. Different symbols can be used to identify the same instrument; identifiers can also be subject to frequent change.

A number of industry initiatives are looking at more standardised instrument classifications and identifiers including the Financial Stability Board (FSB) (its feasibility study in 2014 concluded that “it is critical for any data aggregation option that the work on standardisation and harmonisation of important data elements be completed, in particular through the global introduction of the Legal Entity Identifier (LEI), and the creation of a UTI and UPI”. SWIFT, ISDA and other industry bodies are also engaged in developing data and messaging standards to support industry standardisation and consistency.

Meeting regulatory reporting obligations

From working closely with our customers, it is clear that meeting regulatory reporting obligations - getting the right data in the right boxes at the right time - is their most pressing challenge. Fortunately, helping businesses to navigate smoothly through ever-changing regulatory reporting seas is our entire focus.

To find out more about reference data trends and challenges, download our comprehensive eBook “Reference Data: The Essential Guide”.