Firms Face Lack of Clarity on MiFID II Data Transparency Obligations

Blog entry

Meeting the data transparency obligations of Markets in Financial Instruments Directive II (MiFID II) continues to be a challenge for financial institutions struggling to manage the scale of change presented by the regulation, improve data quality to achieve transparency, and implement solutions without final clarity from the European Securities and Markets Authority (ESMA) on outstanding issues.

The problems raised by the data transparency requirements of MiFID II were discussed during A-Team Group’s recent Data Management Summit in London. While MiFID II was very much on the agenda, its transparency elements were the subject of a specific panel moderated by John Mason, global head, regulatory content propositions at Thomson Reuters, and joined by Gaurav Bansal, MiFID II programme director at Tilney Bestinvest Group; Peter Moss, CEO at the SmartStream Reference Data Utility (RDU); and Tony Russell, director at Commerzbank.

Kicking off the conversation, Moss described the challenges of data transparency including the scale of change required by MiFID II, the need for data quality and the inverse problem of hundreds of organisations submitting mixed quality reference data to regulatory agents. He did, however, point out that this should improve over time.

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Russell said: “We have been working on MiFID II for 18 months, but I am still worried about the 3 January, 2018 deadline. We need to achieve a speed of 15 minutes to report, manage complexity, particularly around OTC derivatives, review voice trading and deal with a lack of clarity on some points of the regulation.”

From the buy-side perspective, Bansal commented: “We are focussing on transaction reporting, which requires a huge amount of data capture. Our immediate focus is compliance, but from there on we see no standardisation of how data will be communicated. ESMA is not specific on standards, so next year standards will continue to be a challenge.”

Issues around the use of ISINs to identify OTC derivatives were also raised as potential barriers to transparency, with Russell suggesting clarity is required from EMSA on this and Moss agreeing as the SmartStream RDU gears up to cope with millions of ISINs under MiFID II.

With data transparency challenges and a lack of regulatory clarity still to be ironed out, the panel turned its attend to the expectations of regulators come the MiFID II compliance deadline. Russell said: “Regulators will expect firms to have tried. They won’t expect systems to be working perfectly, but they will expect firms to have put in effort to get to where they should be. Mid-year next year, regulators will be looking closely at what firms are actually doing. They will want to see improvements in data quality, connections to Approved Publication Arrangements (APAs) and Approved Reporting Mechanisms (ARMs), as well as delivery of best execution.”

Considering the enormity of change required by MiFID II, Moss concluded: “The window is closing for our industry to get everything together. More clarity is critical, but data transparency will still be a challenge that the industry rather than regulators will resolve.”

Join A-Team’s Data Management Summit in New York City next week to hear more about MiFID II and other regulations that will have an impact on your business and operations.