One of the challenges of transaction reporting is ensuring that submissions continue to be correct. Often an investment firm may map their trade data to report fields correctly for “Day One” reporting. However, as days go by and new products are launched and regulation changes, report processes that initially worked may have data capture holes or errors in them.
In these cases, there is a benefit when working with partners that provide immediate support and answers on adapting to new regulatory standards and feedback as well as making any software or system changes needed.
A major CFD broker, came to Cappitech with questions about how we handle various reporting processes under EMIR and MIFID II. They were already working with another vendor but curious to learn how Cappitech supported customers for regulation changes such as the switch from EMIR level II to level III in November 2017, calculating daily positions and handling questions related to MIFID II reporting.
As business grew for this CFD broker, an important issue for them was ensuring submissions continued to be accurate. However, they felt there was a gap in support from their existing vendor in providing answers to their questions as well as offering technical solutions to assist for required changes.
The Cappitech Solution
Step 1 – Review & Health check
To support the broker, Cappitech initially provided a free review of their existing EMIR and MIFID II reports. The goal was to identify if there were any glaring errors that needed to be addressed. The review also covered the broker’s report creation process to spot any inefficiencies with creating their reports.
For Cappitech, the review is standard for new customers onboarding after moving from another vendor. Currently supporting over 100 investment firm clients, combined with lots of knowledge working with Trade Repositories and ARMs has allowed Cappitech to gain a strong working knowledge of common reporting problems and best practices for reporting.
Overlooked issues that firms may not be addressing before moving to Cappitech include:
- Incorrect position compression which leads to non-closed positions under EMIR
- Failing to capture full lifecycle chains such as partial position closures which can lead to missing reports and double UTI counts
- Lack of minor to major price currency conversions such as the GBp to GBP
- Incorrect trading capacity identifiers
- Wrong usage of decision maker and buyer/seller fields under MIFID II
- Over and under reporting due to faulty eligibility rules
- Integration with alternative datasets to reduce manual work
Step 2 – Analysis & FeedbackGathering information about the broker’s license type, products traded and liquidity providers, Cappitech had a basic understanding of how their EMIR and MIFID II reports should be structured. We then cross-referenced this information to their existing report submissions to analyze for common errors. The analysis led us to ask the broker a number of questions to clarify their existing reports. Questions included:
- Quantity calculations – we noticed similar products with different quantity calculations. This could either be an error or due to similar products having different trading conditions such as for Regular and Pro account
- Trading capacity – As trading capacity and buyer/seller identifiers are one of the most common MIFID II errors, Cappitech asked for confirmation on their existing methodology
- Trading venue – We reviewed if the broker was trading facing their liquidity provider directly or via the registered trading venue
- ISINs – We noticed trades being reported using both a product’s ISIN and underlying ISIN and confirmed whether this was correct
- Aggregated trades (INTC) – Among CFD brokers, this firm is unique in that they also have a portfolio management license. Cappitech confirmed the process of how managed account transactions and compared it to how allocations were being shown on their MIFID II submissions.
Step 3- Migrating to CappitechComparing feedback and support with their existing vendor, the broker decided to migrate their reporting to Cappitech. Several factors led to an easy transition to Cappitech for the firm:
- Cappitech Plug-in: allowed the firm to easily transfer their data without having to change their format. They simply switched their IP address.
- Wide range of reporting solutions: our all in one compliance platform allowed the broker to match and improve all their regulatory reporting requirements from day one.
- Easy and quick onboarding process: Cappitech has an established and practiced process for overcoming the seemingly daunting task of re-onboard reporting with a new vendor. Implementing this process for the broker ensured a smooth, simple and headache free process.
- Dedicated account manager and knowledgeable regulatory specialist guided the process every step of the way. Correct setup ensures accurate reporting not only from day one but continued accuracy and future proofing of reporting.