MiFIR versus EMIR – which is the most important reporting regime?

There are many similarities between the MiFIR transaction reporting and EMIR trade reporting requirements. Both are T+1 reporting regimes and there is a large overlap in the instrument set that they cover. However, there are distinct regulatory drivers behind each regime: MiFIR transaction reporting is primarily used to detect market abuse whilst EMIR trade reporting is used primarily to monitor for systemic risk.

There is no doubt that combating market abuse is a very important regulatory service; everybody benefits from clean markets. Complete and accurate transaction reports are vital to help the regulators perform this task effectively. However, systemic risk is even more important as it represents the risk of collapse of the entire financial system -there is no point monitoring for market abuse if the financial system has collapsed around you.

It is very interesting therefore to compare the number of errors and omissions forms for MiFIR breaches against the number of equivalent forms for EMIR trade reporting breaches. Statistics from the UK Financial Conduct Authority (FCA) obtained through a Freedom of Information Act request show that it received notifications from 384 firms MiFIR transaction reporting breaches since go-live compared to a paltry 75 for EMIR trade reporting in the period since Q2 2018 when the EMIR breach form became available. So, it is tempting to believe that firms recognise the relative importance of EMIR trade reporting and are making greater efforts to ensure the accuracy of data they report. Sadly, this is not the case. At Kaizen, we perform data quality checks on firms’ transaction reports and trade reports. For EMIR we initially find that a much lower number of EMIR trade reports are accurate than compared with the MiFIR reports we test. This reflects the complexity of the reporting regime, but we find firms’ reporting quality rapidly improves once we have highlighted and explained the errors to them.

So this presents an apparent anomaly. The evidence suggests the quality of EMIR trade reports is at a lower level than the quality of MiFIR transaction reports, yet over five times as many firms have notified the FCA of MiFIR transaction reporting errors than they have for EMIR trade reporting. It is not difficult to understand why this is the case; the FCA is constantly reminding the industry on the need to notify them of MiFIR transaction reporting breaches, and to correct those errors, but it appears to be comparatively silent on the need to notify them of EMIR reporting breaches. What is more difficult to understand is why the FCA appears to be less active in meeting its G20 commitments in ensuring the same level of high quality in EMIR trade reporting data.

If you’re concerned about the quality of your MiFIR transaction reporting data or EMIR trade reporting data or would simply like confirmation that it is accurate and complete, please get in touch for a complementary consultation with one of our regulatory experts.