There has been a marked improvement in the quality and use of transaction data among EU financial regulatory authorities in their day-to-day supervisory activities, according to the ESMA.

In the third edition of its data quality report, the EU’s financial markets regulator and supervisor found that the boost follows its adoption of a new approach to data monitoring, which was set in 2022.

It concludes that joint engagement by ESMA and National Competent Authorities (NCAs) to improve the quality of transaction data, including input of the European Central Bank and European Systemic Risk Board, have “brought tangible and observable benefits for all data users, which in turn have enriched the data quality process with their own findings and observations”.

Leverage data

But the regulator says that there is more to be done to leverage and monitor data.

“Even though the use of transaction-level data is well established, ESMA sees many more opportunities to further leverage the data for its supervisory, single-rulebook, economic research and supervisory convergence mandates along the lines of ESMA’s 2023-2028 strategy,” it says.

New to this year’s report is analysis of MiFiR transaction data from Authorized Reporting Mechanisms and Approved Publication Arrangements, which follows on from ESMA’s new supervisory powers over Data Reporting Services Providers.  

Brexit

With a wider scope of transaction reporting, the analysis also highlighted more visibility of executed transactions in EU venues where both counterparties are non-EU, cleared outside the EU and not visible in the European Markets Infrastructure Regulation (EMIR) reported dataset.

“This essential source of information is available as the result of the trading venues’ reporting obligations according to Art. 26 of MiFIR,” the report said.

The reporting obligations have also made it possible to monitor the trading activity of UK counterparties – something which was impossible before Brexit, where investment firms reported exclusively to the relevant UK authority.

Data monitoring

ESMA’s new framework, which was published last year, takes a more data-driven and outcome-focused approach to data monitoring, and involves working with the NCAs on data quality issues under the EMIR and the Securitised Financing Transactions Regulation (SFTR) reporting regimes.

Foremost, the new framework consists of two new elements: 

• a centralised data quality dashboard with EU-wide indicators which cover the most fundamental data quality aspects under EMIR; and
• a data-sharing framework that enables relevant authorities to follow up with counterparties when potentially significant data-quality issues are detected.  

More directions are to follow, as ESMA and the NCAs are set to extend the new monitoring framework beyond EMIR and SFTR this year.  

Other reporting guidance and technical documentation related to EMIR Refit will also go live in April 2024.

 MiFIR Article 26 – Obligation to report transactions

1.  Investment firms which execute transactions in financial instruments shall report complete and accurate details of such transactions to the competent authority as quickly as possible, and no later than the close of the following working day.

The competent authorities shall, in accordance with Article 85 of Directive 2014/65/EU, establish the necessary arrangements in order to ensure that the competent authority of the most relevant market in terms of liquidity for those financial instruments also receives that information.

The competent authorities shall without undue delay make available to ESMA any information reported in accordance with this Article.

2.  The obligation laid down in paragraph 1 shall apply to:

(a) financial instruments which are admitted to trading or traded on a trading venue or for which a request for admission to trading has been made;

(b) financial instruments where the underlying is a financial instrument traded on a trading venue; and

(c) financial instruments where the underlying is an index or a basket composed of financial instruments traded on a trading venue.

The obligation shall apply to transactions in financial instruments referred to in points (a) to (c) irrespective of whether or not such transactions are carried out on the trading venue.

Source: ESMA

Read the 2022 Report on Quality and Use of Transaction Data in full.