On April 17, the UK Financial Conduct Authority (FCA) published issue 59 of its Market Watch newsletter. In this issue, the FCA details its findings on the implementation of the revised Markets in Financial Instruments Directive (MiFID II) and the Market Abuse Regulation (MAR).
The topics and related examples of issues are:
- Transaction reporting observations: The FCA’s Markets Reporting Team has identified a variety of issues concerning data quality when firms submit reports of transactions they have executed. Key areas of concern and related examples in the FCA’s newsletter are:
a. systems and controls—some market participants may not be aware that they can request samples of their transaction reporting data, or may not be conducting sufficiently thorough reconciliation;
b. reporting trade price, time and venue—the FCA continues to see errors in transaction reports when UK clocks transition to and from British Summer Time, as well as errors driven by inaccurate clock synchronization;
c. party identifiers—a number of firms have misreported the buyer as the seller and vice versa;
d. instrument reference data—some trading venues and systematic internalizers do not always submit instrument reference data within the timeframe required; and
e. errors and omissions—some firms failed to cancel, correct and resubmit corrected transaction reports to the FCA.
The FCA advises investment firms, trading venues and approved reporting mechanisms to take note of the FCA’s observations and ensure that they have appropriate arrangements in place.
- Telephone recording and retention: Some firms have not properly ensured that conversations are being recorded, even though they have installed telephone-recording systems. The FCA reminds firms of the importance of ensuring that they have systems in place to record telephone conversations. Firms also are reminded that they may find it valuable to use telephone recordings as part of their market abuse surveillance program.
- Use of client codes: Some trading venues have not collected the full client identification code when an order is received. The FCA reminds firms that inaccurate transaction and order data affects the FCA’s ability to maintain the integrity of UK financial markets, which is one of its statutory objectives.
Market Watch 59 is available here.