The Brokers’ Journey to a New Reporting Home Post Market Participants’ Departures

Brokers and other financial institutions, already constrained by limited budgets and the Covid- 19 pandemic, are facing a new unexpected challenge as they hurry to implement new processes and relationships following CME’s announcement that it would be departing as a vendor, ARM and TR.  Just last week, Deutsche Börse also confirmed it is considering exiting the regulatory reporting business. Regulators might be sympathetic, but there will be little or no leeway for non-compliance, thus firms will be expected to continue to meet their reporting requirements at the same or better standard as previously.

Many are already investigating their options, performing vendor assessments to see what’s available. We’ve seen a significant increase in incoming requests for conversations about our service, and the importance of this process can be seen in the breadth of the teams involved including operations, compliance, finance and risk.

In our conversations with those affected, it’s become clear that there are some concerns that are universal with specific items on everyone’s “must have” lists. It’s also rapidly becoming clear that as firms begin this review process, they are identifying opportunities to improve or enhance their reporting and the service they receive.

Data transformation and porting

This is probably the single most important consideration for financial institutions currently. The data porting issue is, technically, one that needs to be dealt with between the CME and the new TR, and is a well established process. But the sheer volume of back data for EMIR may cause problems if not done sufficiently far in advance.

When it comes to submitting data to a new TR / ARM or vendor, clients prefer to provide the same raw file they were sending previously and be 100% confident that the vendor can do the necessary transformation and apply business logic before sending to a TR or ARM. Any delays in getting up and running could lead to missing the November cut-off date from the CME (potentially exacerbated depending on Deutsche Börse’s timing) and trigger late reports and back reporting of EMIR and MIFID II submissions.

Examples of existing data firms are looking to transform for their EMIR and MIFID II reports include pulling of trade data from the MT4 / MT5 trading platforms, from bridge providers or sending same current file format specs being used by the CME/ Deutsche Börse. Among non-brokers, there are requests for firms to be able to transform CSV files extracted from their OMS systems. Any enhancements in efficiency and accuracy are an additional benefit. Other than data transformation, clients also want to be sure that vendors and ARMs can provide a properly GDPR compliance solution for MiFID reporting.

Multiple end-points connectivity  

The need for vendors to be ARM/TR agnostic is central to brokers’ and other financial institutions’ planning currently. Naturally, there are concerns that future changes may lead to further upheaval and some are considering whether to build the functionality for direct connections in house. However, to achieve this, resources and budget would be required now and over time: they would need additional support and maintenance to implement upgrades and changes as a result of inevitable developments such as regulatory changes, new internal systems, software upgrades and so on. Multiple end-points connectivity, ensures this can be handled by the vendor, reducing longer-term effort and risk.

Opportunities for improvement

As firms consider the technical requirements for seamless switchovers, questions on automation and efficiency are naturally considered. Clients are actively seeking options to reduce the impact of future changes and ensure their reporting is “future-proof”. This will position them to keep their reporting accurate with minimal upheaval to their processes when new regulations or changes in regulations, such as Brexit are introduced.  At the same time, these clients  also see the advantage in taking this opportunity to ensure they benefit from improved systems and technology.

For example, what reference data is available? Can the process of identifying and fixing rejections be simplified? Can manual input be reduced? Overall, a new vendor should be able to apply a review of an investment firm’s existing report submission process to identify more efficient methods of reporting as well as spot any current errors taking place. It would be prudent for brokers to select vendors that have vast experience with the CFD broker industry and can advise them based on their expertise in servicing this community.

Control and analysis

This is an obvious opportunity to do a health check on the business and reporting processes. Clients engaging with new vendors can review whether they’re collecting the right data and implement processes to do health checks in the future. This may not have previously been a priority, but by building it in now, they can only enhance the reporting process. It’s also an opportunity to identify previously unrealised errors or to correct processes that generated errors. For many, it may be that they weren’t aware of options for improved reporting.

Improved control functions have significant appeal when they’re demonstrated. Detailed dashboards and extensive analytics are likely to be key differentiators for clients who see the benefit in having these built in to monitor their reporting processes and, in time, provide useful data for decision-making.

One-stop shop

As clients explore their options, they are seeing opportunities to create a one-stop approach that considers reconciliation, best execution and reporting under various regimes (MiFID, EMIR, ASIC, MAS, Canada erc.). Even if these aren’t taken up from the start, their availability may well be a key part of decision-making as teams consider how they will handle these processes in the long term.

The journey may be bumpy, but the destination will be worthwhile

For the broker community, the next four months may be paved with obstacles while trying to find a new reporting home. However, once the dust settles and the transition period has passed, the overall net effect should leave the regulatory reporting community in a much better position than it was. Those that use this time to harness improved technology to automate their reporting, to focus on CAT (Correct, Accurate and Timely) reporting principles while onboarding with new vendors and implementing ways to derive insights from their trade data will ultimately be the winners in this journey.


First published on Finance Magnates here 


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Ronen Kertis
About the author: Ronen Kertis
Managing Director, Head of Cappitech Ronen Kertis is a financial services technology thought leader who has been building software products for over 20 years, across several regions and in different markets. His deep domain expertise has been instrumental in positioning S&P Global Market Intelligence Cappitech as a global market leader in regulatory reporting and compliance intelligence. Prior to founding and acting as CEO for Cappitech, he worked at ITG for 13 years as CEO of ITG Israel and as the CTO of the company’s EU branch in London. He is also a partner in the Angel investing fund AfterDox. Ronen graduated from Tel Aviv University in Electronic Eng. and MBA, with honours.