Deep into the soul of regulatory reporting in 2018

Deep into the soul of regulatory reporting in 2018 blog image

We look back at the regulatory reporting year that was through the songs of Aretha Franklin (sorry Aretha).

We saw yet another true legend sing her last note this year as the world stood United Together and said a fond farewell to the awe-inspiring Aretha Franklin. We apologise to any fan and most importantly to the great lady herself as we look back at the key regulatory reporting developments of 2018 through her songs and lyrics. I am afraid we have not learnt from our 2016 Bowie travesty….

MiFIR transaction reporting go-live

This time last year many of us were running through go-live lists rather than Santa lists and thinking, “I’m going to Drown in my own Tears“. However all that hard work did pay off and all involved deserve their very own Dr Feelgood feeling for their efforts. On the whole, firms got across the line despite the headwinds that presented themselves in the form of instrument data issues (FIRDs / DSB teething issues, understanding TOTV implications, identifying reportable indices), missing LEIs, rogue validation rules at ARMs and the regulator (to mention just a few).

Though what January really signaled was the beginning of the journey and not the end. Firms’ efforts in the first months of the year were focused on reporting as much of their business as possible and dealing with the inevitable spike in validation breaks from the ARMs and competent authorities. Now the equally hard part of putting in controls to comply with RTS 22 Article 15, to check that what is reported is accurate and complete, before the regulator does, is the new priority.

ESMA has been very busy

We always say that regulatory reporting is the gift that keeps on giving, but ESMA can be a little like your eccentric Aunt Vera in delivering something you didn’t ask for and didn’t really want. Well, Vera has certainly been busy this year.  We had new iterations of the EMIR Q&A from ESMA on 12 July and 26 July. And since MiFIR reporting went live on 3 January, we had updates to the Q&A on 25 May and 26 September and some tweaks to the validation schemes as well.

To be fair to ESMA, we haven’t had the avalanche of information overload we experienced in 2017 and the Q&A mechanism is an essential tool to help bed-down the new reporting regimes so we are Willing to Forgive. Whilst change can often be painful, you can always rely on Kaizen to ensure our ReportShield™ testing reflects the very latest gift from ESMA to keep you One Step Ahead.

The FCA and SMCR

When it comes to the Senior Managers and Certification Regime (SMCR) regime it is plain for all to see that the FCA is expecting firms to demonstrate some Respect. In the coming year, the regime will be extended to the core SMCR firms under which an individual within a firm will be ultimately responsible for ensuring that a firm complies with the conduct rules and expectations. Being able to evidence their firm’s reporting is accurate and complete will be a key demand from those who hold this responsibility.


Having published its Final Report: Technical Standards under SFTR and certain amendments to EMIR back in March 2017, ESMA and the market anticipated that by December 2018 this would be a live reporting regime for investment firms and credit institutions (banks). All that was needed was European Commission endorsement and the legislative steps that follow….

The European Commission had a Think and after 15 long months eventually piped up I Knew You Were Waiting in late July 2018, albeit with a long list of proposed amendments; largely semantics. Unfortunately, the Commission also decided that A Change is Gonna Come in reference to the rights that ESMA claimed to govern UTI and branch LEI standards endorsement. They left it with ESMA, Call Me.

ESMA responded to the proposed amendments in September 2018, but unfortunately, it was not with Amazing Grace but rather a dismissive ‘Non,’ rejecting all the changes. The ball is now firmly in the European Commission’s court and as for the bickering, we’re sure It Hurts like Hell but to date, they have not yet found a Bridge Over Troubled Water and endorsed a final RTS for European Parliamentary and Council scrutiny. May the market sing Oh Happy Day when ESMA and the EC stand United Together and we get some certainty over the timing of SFTR go-live.

Trade reporting and Jumpin’ Jack Flash

So quite like Jumpin’ Jack Flash, trade reporting for MiFIR started on 3 January 2018 like a cross-fire hurricane with levels of uncertainty and clarity over different aspects of the regulation and the whole market frowned at the crumbs of a crust of bread at the quality of data.

Firms howled at the morning driving rain with the barrage of Q&A updates throughout the year but as mentioned previously, this has certainly helped bring clarity to many grey areas within the regulation.  DVC, LEI and SI regime delays helped investment firms that felt drowned, washed up and left for dead by the various regulatory demands placed on them.

What does 2019 hold for us?  The derivatives systematic internaliser regime. Could we start to see a penalty or sanction regime set out by ESMA and the NCAs which could leave investment firms crowned with a spike right through my head?  Questions still do remain though as to whether transparency and a level playing field has really been achieved…

A view from across the Atlantic

The CFTC has also been busy in 2018. Two White Papers published suggest that in these Ever Changing Times it is necessary to refresh the Dodd Frank(Iin) Act.

The first paper, ‘Swaps Regulation Version 2.0’ sets out new proposals to change reporting to a T+1 model and bring in more detail to collateral data requirements. The second paper, which had us singing Border Song, sees The Weight of regulatory burden somewhat lifted for non-US entities where risk is sufficiently monitored by their home regulations.

No official new rules or timeline has been given yet but we hope the CFTC will Get It Right when legislation is published. We’ll work with our clients to Jump To It and make the necessary preparations when the time comes.

Brexit – I say a little prayer

As we approach the end of the year the shadow of Brexit looms large for everyone.  We will share our thoughts on the impact on reporting early in the New Year but in the meantime, season’s greetings from all of us at Kaizen and we wish you a restful break with your family and friends. We thank you for your continued support and we look forward to helping you feel Rock Steady about your reporting quality in the New Year and beyond.

If nothing else, we hope you have enjoyed listening to some fantastic and enduring classics…you can listen to our Spotify playlist here.

With thanks to Kaizen Reporting’s industry leading reporting experts for their contributions. Dario Crispini, David Nowell, James Mooney, Jonathan Lee and Chris Machin.