The FCA is targeting over £100 million in savings as part of new proposals to streamline transaction reporting requirements.
The FCA receives over 7 billion MiFID transaction reports a year used to support the cleanliness, transparency and resilience of UK markets.
To reduce costs for firms, support growth and improve the quality of data received, the FCA has proposed:
• Removing foreign exchange derivatives from reporting requirements, reducing costs for over 400 firms,
• Removing reporting requirements for 6 million financial instruments including equities, bonds and certain derivatives that are only traded on EU trading venues,
• Reducing the period for correcting historic reporting errors from five to three years, lowering the number of transaction reports that need to be resubmitted by a third.
The FCA will also work with the Bank of England and the Treasury to remove any unnecessary duplication of transaction and post-trade reporting requirements as part of a new long-term approach.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “Transaction reports are essential, helping us to detect financial crime and monitor the resilience of our markets. But we can be smarter, and by clarifying and streamlining requirements we expect to receive more accurate and complete reports.
“Reducing costs while improving the quality of the data we receive is a no brainer. It means we can support growth and receive better market intelligence to act on.”
Maria Fritzsche, senior policy adviser at PIMFA, commented: “We welcome the FCA’s decision to reduce the back reporting period, which provides a helpful adjustment for firms across the sector. While we had asked the FCA to consider shortening the period with little expectation of change, it is encouraging to see our views reflected in this outcome.
“Firms will need to adapt systems built up over eight years of MiFID II reporting, which carries costs, so the proposed reduction from 48 to 37 instrument reference data fields must be implemented carefully and with clear guidance. We look forward to responding to the consultation paper and reviewing the additional clarity the FCA has promised on specific reporting requirements, to ensure the proposals are practical and aligned with the growth agenda.
“This announcement demonstrates that the FCA is listening and taking meaningful steps to ease the reporting burden, a welcome sign of progress in the right direction.”
Rollo Burgess, partner at Capco, added: “The FCA’s announcement today of their direction of travel to streamline and simplify reporting obligations, while retaining critical market transparency, is certainly welcome. Not only do current reporting obligations come with an annual cost of nearly £500m (noted by the FCA), but they also impose a material frictional cost and complexity on change activity, affecting all major initiatives. Reducing this complexity will promote innovation and productive investment.
“While this will benefit all firms within scope of these obligations, it will be particularly impactful for larger organisations with broad product offerings and complex booking models, and in many cases delegated reporting obligations on behalf of clients.
“A thoughtful simplification of obligations of reporting requirements should not increase operational risk, but there is a potential risk in divergence between the UK and other jurisdictions. This needs careful focus, as managing diverging regulatory environments could introduce complexity, contrary to the spirit and intent of these proposals.
“When considering this potential for divergence between the UK and other jurisdictions, it is critical that firms carefully digest and plan for these changes to ensure they are implemented in a way that evolves and improves the overall reporting environment and operating model. Layered and continual change in obligations can often bring unintended consequences such as challenges with the management of reporting logic and data in many institutions. To make sure we get value from these well-intentioned reforms, firms need to ensure that their response improves the overall reporting model, rather than just implements the new rules.”
