It says compliant reporting in response to the Transaction Reporting regime has improved over time, but provides a reminder of requirements and responsibilities that firms have to report and correct where errors are identified. Specific areas of concern are outlined including:
- Where more than one person or algorithm is involved in an investment or execution decision, the person or algorithm taking primary responsibility for the decision should be identified in the transaction report.
- Transaction reports submitted for spread trades which do not conform to the ESMA transaction reporting guidelines as a complex trade, involving a simultaneous buy and sell of two (or more) instruments quoted at a single price, typically a spread between the yield of the two instruments in basis points.
- Where certain predefined conditions are met, including an agreement between the ‘transmitting firm’ and the ‘receiving firm’, the transmitting firm is relieved of the requirement to submit a transaction report.
- Inconsistencies in the notations reported by investment firms for the price and quantity fields. In cases other than where a specific price or quantity type is required for the instrument traded (for example, credit default swaps (CDS) – price in basis points; equity – quantity in units), firms may determine the most appropriate notations to report. The FCA urges firms to follow market convention when determining which notation to use.
For transactions executed under the rules of a trading venue, both parties are expected to report the market identifier code (MIC) of the trading venue. Some firms have misidentified funds as the buyer or seller in transaction reports when dealing with a fund manager.
Financial instruments
For transactions in financial instruments where instrument details must be populated in fields 42-56, the FCA has seen variable data quality issues.
To avoid late reporting, trading venues and SIs must submit instrument reference data to the FCA by 21.00 CET on each day they are open for trading for all financial instruments admitted to trading or that are traded on their platforms before 18.00 CET on that day.
The FCA points out that Spot FX is not a financial instrument under the UK MiFID framework. The submission of reference data for spot FX instruments can therefore mislead investment firms as to the scope of their reporting obligations.
When instrument reference data is submitted to the FCA in error, it should be cancelled by the submitting entity. Transaction reports are used by the FCA to undertake market abuse surveillance, therefore the accuracy of them is paramount to the efficacy of the monitoring undertaken. While it is broadly recognised that the mechanism is not straightforward (to report with all fields accurately), fines have diminished in this area and this is a softer form of guidance adopted by the FCA. Firms should pay attention as this may not always be the case.
