MiFID II / MiFIR Transaction Reporting A Practical Guide

So, what can firms do?
When MiFID I was introduced in 2007, many financial institutions
failed to respond correctly, resulting in expensive and inefficient
‘quick fixes’, and in the cases above, significant financial penalties.
The current state of play in terms of data control processes at
most financial institutions, tends to be one of the following:
Spreadsheets, UDAs and manual work
Due to the complexities surrounding data control and
reconciliation, many institutions are still using spreadsheets and
manual work to fulfil their reporting obligations. However, with the
vast increase in data that MiFID II/MiFIR is going to bring, such
solutions will soon become impractically expensive and high risk.
User-Developed Applications (UDAs), for example, generally rely
on key members of staff to edit and maintain them, creating high
levels of risk should they be unavailable at critical times.
Also, as these UDAs are often in Excel, there are no proper audit,
evidence, governance or workflow functions. This might be fine
when everything is working properly, but as soon as there’s a
break, or if an unaudited user changes critical matching criteria,
it’s far more difficult to fix or even find the route cause of the
problem – leading to resource-intensive projects and the potential
for large fines.
While regulators have not specifically outlawed the use of
spreadsheets and UDAs, it is commonly accepted that under MiFID
II organisations need a much more robust and scalable approach
to data control.
Legacy architecture
Many firms will be updating their current systems to support the
new regulations. However, the majority of these systems are
difficult to scale, particularly considering the large increase in
reportable fields and data required.
Recent research from Aite group, for example, shows that it
takes over 64 days on average for financial institutions to set
up a new reconciliation.
Similarly, just patching up an old system to handle new data is
hardly future-proofing the organisation for subsequent changes.
MiFID II and MiFIR are certainly posing data challenges for
financial institutions, but they’re also a great opportunity for firms
to fundamentally transform their control processes, enabling them
to react more quickly and more efficiently to upcoming regulations.
Average time taken to analyse, build and test a new reconciliation
Analyse
Build
Test
23.87 25.67 14.86
Days Days Days
Source: “Reconciliation Trends in 2016:
Regulation and Nervous Recs”, Aite Group,
February 2016
Total 64.4 days
MiFID II / MiFIR Transaction Reporting
A Practical Guide