In search of the holy grail of MiFID transaction reporting
22 Mar 2023
Jenna Lomax speaks to Qomply’s Michelle Zak about how her company is disrupting the industry by enabling firms to directly deliver a quality MiFID report to the regulator
Image: Qomply
QomplyDirect has awoken financial firms to the prospect of taking control of their MiFID reporting and eliminating extra services and unnecessary costs.
The premise is straight-forward — QomplyDirect empowers firms to send their transaction reports directly to the Financial Conduct Authority (FCA). Firms submit their own reports directly to the regulator without using an intermediary, such as an approved reporting mechanism (ARM).
For some firms, this represents a significant cost saving as well as a way to gain control over their reporting (and back-reporting).
For many, the notion of sending reports directly to the regulator may be akin to the first time they tapped an app to summon a cab to their doorstep — a ‘why-wasn’t-this-thought-of-sooner’ moment. So why aren’t the majority of firms submitting their reports directly to the regulator?
To understand this, we must cast our minds back to 2018, before MiFID went live. At that time, those daunting 65 fields and warnings of over-reporting triggered an innate fear in firms not to get it wrong.
Firms scrambled to meet the requirements and, in doing so, enlisted the help of ARMs – which were newly-created (and regulated) reporting mechanisms that submitted the transaction reports to the regulator on their behalf.
ARMs would filter out non-reportable instruments, run cursory validation checks and submit the transactions to the regulator. This mitigated the amount of in-house work a firm had to complete within the short window before MiFID went live. From this, new-style reporting commenced.
ARM submission fees are a function of transaction volume — the higher the volume, the higher the fees.
Business continuity was paramount, and firms were willing to spend the money. Plus, if these ARMs were regulated, there was a consensus that they must offer firms some higher level of protection. For smaller firms, this made sense. For mid-to-larger firms, with more complex reporting scenarios and higher transaction volumes, it didn’t always work so well.
Five years later, firms recognise there may have been a disconnect between what they believed an ARM function was and what it actually did. There is no doubt that ARMs apply the European Securities and Markets Authority validation rules — checking if a character is being squeezed into a numeric field.
However, when it comes down to forensic detail and the interrogation of fields (and how they interrelate in an asset class or product basis), this is clearly not in the remit of an ARM. ARMs don’t always highlight anything beyond simple validation, and so poor data often slipped through the net. Transaction reports that were thought to be accurate may have missed the mark.
QomplyDirect
Regulators are now pointing out potential issues in firms’ transaction reporting and highlighting that they are responsible for errors. As a result, firms are required to correct previously-submitted transactions.
In many cases, corrected transactions or back-reports number in the millions, but putting things right means the resubmission passes through the same ARM again. In what feels like a case of double-jeopardy, ARMs and aggregator solution providers apply additional fees for resubmissions.
Firms need a higher degree of quality assurance and often find themselves paying twice, because they didn’t initially interpret the complex set of regulatory rules surrounding each field of the transaction report correctly. The responsibility for accuracy rests with the firm and not the ARM.
“It does put someone on the back foot when they discover their reporting has been inaccurate for a long period and the regulators are asking questions,” observes Michelle Zak, co-founder and managing director at Qomply.
She adds: “There is always that ‘deer-in-the-headlights’ moment when the compliance and regulatory operations teams realise that the external solutions they utilised did not offer the level of protection they thought they had.”
“The interest in QomplyDirect is an indicator that firms crave options, especially as, these days, firms better understand the implications of inaccurate reporting. Transaction reporting, when viewed in its totality, has become significantly more costly over the last few years. Shedding unnecessary costs, whilst gaining higher-quality accuracy and validation checks, just makes sense. If firms with lower transaction volumes find it economical to continue using an ARM — no problem.”
Zak goes on to say: “QomplyDirect facilitates firms to send reports to an existing ARM or to the regulator. The key point is that Qomply provides high-quality, forensic-level accuracy checks, which means less back-reporting. Getting it right the first time is always preferable. There is no need to pay for additional ARM services when Qomply offers it directly. With QomplyDirect, everything can be controlled programmatically. We connect the dots with our API access — the sending of the report, the retrieval of the messaging — all on one platform,” Zak concludes.
Using one portal to manage messages from various destinations means more efficiency and lower costs. After five years of MiFID, firms are calculating costs and recognising that ongoing fees paid to external ARMs — to submit their reports to the regulator — are no longer justified or sustainable.
Qomply is changing the approach the industry takes on compliance. Technology from Qomply is geared towards helping firms fulfil their regulatory obligations in a more streamlined, cost-effective way.
Their award-winning technology for MiFID, SFTR, and EMIR has been recognised for offering a comprehensive set of checks not seen before on the market.
Qomply forms an essential part of a firm’s systems and controls framework — providing customers peace of mind that their transaction reports are as complete and accurate as possible.
The premise is straight-forward — QomplyDirect empowers firms to send their transaction reports directly to the Financial Conduct Authority (FCA). Firms submit their own reports directly to the regulator without using an intermediary, such as an approved reporting mechanism (ARM).
For some firms, this represents a significant cost saving as well as a way to gain control over their reporting (and back-reporting).
For many, the notion of sending reports directly to the regulator may be akin to the first time they tapped an app to summon a cab to their doorstep — a ‘why-wasn’t-this-thought-of-sooner’ moment. So why aren’t the majority of firms submitting their reports directly to the regulator?
To understand this, we must cast our minds back to 2018, before MiFID went live. At that time, those daunting 65 fields and warnings of over-reporting triggered an innate fear in firms not to get it wrong.
Firms scrambled to meet the requirements and, in doing so, enlisted the help of ARMs – which were newly-created (and regulated) reporting mechanisms that submitted the transaction reports to the regulator on their behalf.
ARMs would filter out non-reportable instruments, run cursory validation checks and submit the transactions to the regulator. This mitigated the amount of in-house work a firm had to complete within the short window before MiFID went live. From this, new-style reporting commenced.
ARM submission fees are a function of transaction volume — the higher the volume, the higher the fees.
Business continuity was paramount, and firms were willing to spend the money. Plus, if these ARMs were regulated, there was a consensus that they must offer firms some higher level of protection. For smaller firms, this made sense. For mid-to-larger firms, with more complex reporting scenarios and higher transaction volumes, it didn’t always work so well.
Five years later, firms recognise there may have been a disconnect between what they believed an ARM function was and what it actually did. There is no doubt that ARMs apply the European Securities and Markets Authority validation rules — checking if a character is being squeezed into a numeric field.
However, when it comes down to forensic detail and the interrogation of fields (and how they interrelate in an asset class or product basis), this is clearly not in the remit of an ARM. ARMs don’t always highlight anything beyond simple validation, and so poor data often slipped through the net. Transaction reports that were thought to be accurate may have missed the mark.
QomplyDirect
Regulators are now pointing out potential issues in firms’ transaction reporting and highlighting that they are responsible for errors. As a result, firms are required to correct previously-submitted transactions.
In many cases, corrected transactions or back-reports number in the millions, but putting things right means the resubmission passes through the same ARM again. In what feels like a case of double-jeopardy, ARMs and aggregator solution providers apply additional fees for resubmissions.
Firms need a higher degree of quality assurance and often find themselves paying twice, because they didn’t initially interpret the complex set of regulatory rules surrounding each field of the transaction report correctly. The responsibility for accuracy rests with the firm and not the ARM.
“It does put someone on the back foot when they discover their reporting has been inaccurate for a long period and the regulators are asking questions,” observes Michelle Zak, co-founder and managing director at Qomply.
She adds: “There is always that ‘deer-in-the-headlights’ moment when the compliance and regulatory operations teams realise that the external solutions they utilised did not offer the level of protection they thought they had.”
“The interest in QomplyDirect is an indicator that firms crave options, especially as, these days, firms better understand the implications of inaccurate reporting. Transaction reporting, when viewed in its totality, has become significantly more costly over the last few years. Shedding unnecessary costs, whilst gaining higher-quality accuracy and validation checks, just makes sense. If firms with lower transaction volumes find it economical to continue using an ARM — no problem.”
Zak goes on to say: “QomplyDirect facilitates firms to send reports to an existing ARM or to the regulator. The key point is that Qomply provides high-quality, forensic-level accuracy checks, which means less back-reporting. Getting it right the first time is always preferable. There is no need to pay for additional ARM services when Qomply offers it directly. With QomplyDirect, everything can be controlled programmatically. We connect the dots with our API access — the sending of the report, the retrieval of the messaging — all on one platform,” Zak concludes.
Using one portal to manage messages from various destinations means more efficiency and lower costs. After five years of MiFID, firms are calculating costs and recognising that ongoing fees paid to external ARMs — to submit their reports to the regulator — are no longer justified or sustainable.
Qomply is changing the approach the industry takes on compliance. Technology from Qomply is geared towards helping firms fulfil their regulatory obligations in a more streamlined, cost-effective way.
Their award-winning technology for MiFID, SFTR, and EMIR has been recognised for offering a comprehensive set of checks not seen before on the market.
Qomply forms an essential part of a firm’s systems and controls framework — providing customers peace of mind that their transaction reports are as complete and accurate as possible.
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