This recent Synechron paper takes an in-depth look into the ways forthcoming MiFID / MiFIR regulations in the EU are expected to impact record keeping, reporting, and transparency in financial institutions. Recommended steps to be taken to achieve compliance have been offered, keeping in mind the variety of complex issues that financial firms can expect to confront as they aim to achieve compliance.
New York-based business consulting & technology services firm, Synechron, frequently publishes valuable insights to its website around its key areas of expertise: digital processes, business consoluting, and technology. This recent paper – entitled ‘MiFID II / MiFIR: Reporting for Financial Institutions’ and authored by Silvano Stagni, Global Head of Research at Hatstand, a Synechron company – reviews the reporting obligations of a financial institution under the EU’s new MiFID II / MiFIR regulatory measures.
MiFID II vs. MiFIR
Nearly a decade ago, European Share Trading underwent a major transformation with the introduction and implementation of the original Markets in Financial Instruments Directive, or MiFID. Now, approximately 9 years on from that first implementation, MiFID II has been approved but the European Parliament to revise the original legislation. To clarify for those less familiar with the topic: MiFID II is a new version of the original MiFID directive, created to suggest changes to the existing directive. As with any directive, jurisdictions are free to adapt differently. MiFIR refers to the actual regulation in place to enforce the MiFID II directive, and must be implemented by all EU states as is.
Reporting is generally considered to be a central aspect of regulatory compliance. MiFID II/MiFIR identifies which reports need to be delivered to the ESMA, national regulators, or to Authorised Publication Authorities (APAs) regularly, and further outlines record keeping requirements. These include the order book, in which data must be made available to National Regulators on demand, but is not required to be reported upon on a regular periodic basis.
Arguably the most complex aspect of the reporting process is ensuring that correct data is available when it is needed. In the new MiFID Review, data-driven transformation is most disruptive. The regulatory scope has been extended to include non-equity products, and a wider use of the Legal Entity Identifier (LEI) is now in place. Identification and classification of financial instruments is now a requirement, and more ‘roles’ exist that need to be identified.
Reporting & record keeping
The most essential difference between reporting and record keeping is that the former has a frequency requirement (e.g. real-time, daily, monthly, quarterly, and so forth), whereas the latter must only be made available on an on-demand basis. Reporting is delivered to recipients including National Competent Authorities (NCA), Authorised Publication Agencies (APAs), clients, etc. – unlike record keeping practices, which require that data be entered and stored in an easily accessible and readily available format.
Regulatory measures indicate which data regulators will demand from firms in reporting. In some cases, financial firms may not necessarily capture all the required information, and it may turn our that the data landscape needs a review. Indeed it is these real complexities that plague regulatory reporting. Although some data items may prove easier to acquire than others, the fact that all reports require highly specific timeframes, among others, means that overall the main challenge will be ensuring that all the correct data is in place at the correct moment.
Where Synechron comes in
Synechron’s own Subject-matter Experts (SMEs) can offer practical advice toward choosing the appropriate responses and solutions to regulatory requirements. The impact of regulation can have far-reaching consequences, and at a minimum requires the translation of requirements into a comprehensive project plan. Synechron provides the personnel and expertise needed to implement and integrate changes into the business. Synechron’s Regulatory Advisory Service provides a comprehensive review of all new regulations affecting its clients.
To read or download the full Synechron paper: MiFID II / MiFIR: Reporting for Financial Institutions as a PDF, click here.
