Brexit and MiFID II Transaction Reporting

Brexit and MiFID II Transaction Reporting - Leaman Crellin

FCA’s Market Watch 64 is a timely reminder that the count down to the end of the Brexit Transition on 31 December 2020 is underway.

What’s Changing?

Back in June 2016 FCA said that EU Regulation would continue to apply to UK firms until such time as changes are made. FCA also intends the transition to be as smooth as possible and the underlying mechanics of reporting or the reporting logic will remain as it.

Many changes are much more practical such as the Relevant Competent Authority field defaulting to GB. And FCA Financial Instrument Reference Data System (FIRDS) replacing ESMA FIRDS. FCA has been feeding FCA FIRDS with live production data so that its database of instruments is complete by the end of the Transition.

The Brexit Statutory Instrument for Transaction Reporting states that if there is no reciprocation FCA does not have to cooperate with the EU counterparts. Introducing some challenges if those provisions have to be exercised which we are watching with interest.

Market Watch 64

A key message from Market Watch 64 is a reminder of what FCA said on 1 February 2019. There will be no transitional relief.

If you cannot comply at the time of Brexit you will need to be able to back-report missing, incomplete, or inaccurate transaction reports as soon as possible. Make sure you are proactive in your conversations with supervision should you find yourself in that situation.

You need to begin your preparations to either connect directly to the FCA’s Market Data Processor (MDP) if you haven’t already. Or use your ARM to make your Transaction Reports to the FCA by the end of the Transition. Testing that you, or your third-party provider, have access to FCA FIRDS is an important step.

FCA Expectations

Principle 3 says “take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems”. FCA places great importance on compliance with Principle 3 in relation Transaction Reporting. As we note in our How to Guide on MiFID II Transaction Reporting.

Many firms are considering whether they need to have a Senior Manager with oversight of their Transaction Reporting. Check you have an SMF with oversight of your Brexit preparations for Transaction Reporting. Including making use of the Industry Test Environment of FCA FIRDS both to download full and delta reference files as well as to test your data submissions

FCAs enforcement action will be proportionate given the scale, complexity, and magnitude of some of the changes brought about by Brexit. It is unlikely that FCA will take action if you took reasonable steps to prepare. Meaning that you should sure that you have a record of the steps you have taken.

Market Watch 64 is a timely reminder that the count down to the end of the Brexit Transition on 31 December 2020 is underway.