Reconciliation: The Heart of Regulatory Reporting Controls
In the high velocity and interconnected landscape of global financial markets, transparency and robust oversight are vital. Transaction reporting plays a critical role of a firm’s compliance process, and serves as the primary mechanism through which regulators gain visibility into trading activity worldwide.
Yet, for all its importance, accurate reporting is a complex, resource-intensive process, relying on an intricate blend of regulatory knowledge, high quality data, and, increasingly, smart automation. This is necessary as firms grapple with managing multiple reporting regimes. According to our Global Regulatory Reporting Survey in 2024, we can see that this burden is increasing, with firms needing to comply with, on average, three regimes, often more. Firms must have high quality data to meet their own, and regulators’ priorities.
At the heart of all of this lies reconciliation which is quietly becoming one of the most strategic tools in a firm’s compliance toolkit.
The linchpin of reporting integrity
Reconciliation is the process of verifying internal trade records – your books and records – against what has been reported to, and acknowledged by, regulatory authorities and Trade Repositories (TRs). It can involve comparing data across a wide range of sources, including TR submissions, counterparty records, clearing broker files and internal systems.
Done properly, reconciliation ensures reported data is complete, accurate and consistent, and is core to operational processes. But in reality, it is much more, supporting strategic activities around robust data governance, enhanced risk management and informed decision-making.
This is well recognized by the market. Our survey also told us that improving data quality and reducing operational burdens were top priorities for market participants. At the same time, the most challenging areas cited were, unsurprisingly, reconciliation and correcting matching and pairing breaks. Despite this, more than half of firms are still relying heavily on spreadsheets. That’s not just risky, it’s unsustainable.
Reconciliation isn’t just an operational task, it is a strategic capability. When embedded within a broader compliance framework, it supports:
- Data correctness – ensuring alignment between internal records and reported data
- Regulatory compliance – helping firms demonstrate adherence to evolving rules
- Error detection – catching and addressing mismatches before they become issues
- Improved data quality – creating a foundation for decision-making, reporting and risk management
- Better risk control – flagging anomalies and potential issues early in the process
It’s tough, and getting tougher
Reconciliation is not always easy, and the challenges are growing. Data sources and formats are fragmented, with intricate data mapping requirements and integration challenges across internal systems. Reporting regimes vary in scope, granularity and timelines. Even basic identifiers like LEIs or timestamps can be inconsistent across parties.
Firms must also navigate questions of eligibility. What needs to be reported under which regime, and when, and ensure their systems can keep up with increasingly complex trades, cross-asset portfolios and event-heavy lifecycles.
As daily volumes grow and instruments become more intricate, manual or siloed approaches to reconciliation simply can’t scale.
Future proofing reconciliation frameworks
Rather than simply focusing reconciliation on identifying or managing exceptions, a forward-thinking, robust reconciliation framework delivers a comprehensive solution that not only ensures compliance but also creates operational efficiencies and ensures better data quality across the organization, all with full transparency and auditability.
Key components of an effective reconciliation framework include:
- Smart matching logic – using AI and machine learning to flag patterns, identify missing or mismatched data points, and accommodate product- and regime-specific nuances
- Exception management – scalable workflows with clear prioritization, audit trails and resolution paths
- User-friendly technology – with no-code configuration, real-time dashboards and configurable alerts to reduce reliance on specialized onboarding and support
Reconciliation, reimagined
At Cappitech, we’ve taken everything we know about regulatory reporting and built a reconciliation platform designed to solve for today’s needs while being flexible and adaptable to accommodate what comes next. Our new solution combines AI-powered matching logic and full workflow control to help firms move from firefighting to foresight.
To learn more about building a better reconciliation framework, access our white paper here.
