Now that we are a year post MiFID II, it’s fair to assume that most capital markets firms have their houses in order with respect to complying with MiFID II’s extensive rules. However, they did struggle to comply with certain aspects of the Directive in the run up to it going live, and continue to do so, particularly when it comes to transaction reporting from an operational and technology perspective, according to a Cappitech industry survey.
But the struggle with MiFID II compliance is far from over and with Brexit around the corner the complexities may increase. The Cappitech survey found that respondents were still dealing with certain MiFID II reporting workflows: 19% of all respondents cited a lack of reference data around reportable instruments as one of their primary challenges on the transaction reporting front. Additionally, 45% cited their greatest workflow-related challenge is transaction reporting through their mandated Approved Reporting Mechanism (ARM), while 25% reported that they were not happy with their ARM for various reasons and would consider changing their provider, underlining the extent to which transaction reporting continues to provide operational and technology challenges.
Furthermore, many firms still continue to battle with identifying the specific instruments that fall under MiFID II’s purview. In terms of MiFID II transaction reporting, the vast majority of firms we talk to are reporting, but a lot of them say they have issues. For instance, they are unsure about what falls under MiFID II and what does not in terms of the instruments they need to report. ESMA’s FIRDS (Financial Instrument Reference Database) platform is quite cumbersome and its hard to find what you’re looking for, especially when it comes to derivatives where the underlying might be listed but the derivative isn’t.
“Many firms rushed towards the initial MiFID II implementation deadline in order to comply because they had to,” Ronen Kertis, Founder and CEO of Cappitech explains. “Now that they are reporting, they are asking themselves whether they are doing it in the most effective and efficient way. Based on the survey and also from firms we meet in the market, we see that although transaction reporting mandates are being met, the operational processes underpinning such activities in many cases continues to be unnecessarily laborious and complex, with some firms resorting to using multiple platforms and vendors in order to satisfy their legal obligations.”
MiFID II: Refining the Process
For most firms, gaining greater clarity with respect to their MiFID II reporting obligations was the first big step towards gaining operational efficiency. Unfortunately, as MiFID II transaction data becomes available to the regulator, there have been changes to the Regulators requirements. As outlined in our blog “MifID II – Its not over yet”, just keeping up with these changes requires a firm to establish an internal systematic approach or selecting an assisted reporting vendor to help them. In 2019, the MiFID II focus will shift from implementation challenges to refining reporting processes and keeping up with the Regulators new requirements.
In fact, now that everyone has had time to establish their reporting, it is expected that this year the Regulator will become even more vigilant in enforcing the Directive. We have already started to see evidence of this, as Regulators probe prices reported under MiFID II and have discussed this in more detail in our recent blog. With Brexit coming up, compliance officers will be further challenged with adjusting their reporting processes yet again to get their reporting Brexit ready.
MiFID II and Brexit – Help is on the Way!
To provide clarity on how to get your MiFID II reporting in line with the regulators expectations and to meet your regulatory obligations in a post-Brexit Europe, we invite you to join our MiFID II & Brexit webinar. During the webinar you will get practical insights from market practitioners on how to prepare for the major upcoming regulatory changes, get essential MiFID II feedback from the regulators and delve into best execution and RTS 27 requirements. Register today for the webinar and get the insights you need to meet your regulatory obligations in 2019.
If you are looking for a hassle-free, 100% automated way of reporting MiFID II under Brexit, contact us here.