What is the price of non-compliance?

The report yesterday, by Samuel Agini writing in the Financial News, that the FCA has given UK based trading venues a 31st March hard deadline to be fully compliant with MiFID II trade publication rules should come as no surprise to observers of this space.‍

FCA sets trading venues March deadline to meet Mifid II data rules‍

The work that we, at Ediphy, have been successful at completing over the past 2 years, to consolidate and normalise the MiFID II RTS 2 data, has revealed significant areas of non-compliance with trade data reporting requirements. Other market participants, seeking to utilise the raw trade data, have not been as successful; their task made all the more challenging by non-compliance related data issues.

Issues around over reporting and under-reporting, misuse of reporting flags, clear bad data showing off market prices and huge notionals, data access hurdles (both technical and legal T&Cs) and misleading time stamping of aggregated trades have made the task challenging, to say the least.

Handling large amounts of data and ensuring ongoing compliance places significant demands on the trading venue, SI and APA and, one may suspect, given the already large sunk investment in the run up to MiFID II, there may be an element of ‘mission fatigue’ and perhaps a reluctance to invest further.

That, of course, is a risky approach, given that regulators will inevitably soon find their teeth.

We will see if the, as yet to be disclosed, potential sanction regime starts to focus minds on ensuring compliance.  Of course, financial penalties are within the purview of the FCA.  Although fines are highly unlikely to equal the scale of those meted out last year for transaction reporting transgressions since MiFID I.  Nonetheless, we are more than 2 years into the expected period of compliance.

There may not be the appetite or time to scope out and deliver expensive, long lead time projects from stretched internal IT departments. However, non-compliance and ensuing penalties does not have to be the inevitable outcome.  

Ediphy’s ability to rapidly build self-service monitoring and data quality control dashboards has already begun to gain interest from the market.  

26 business days does not leave a long time to become compliant particularly when venues and APAs may not know that they are not compliant or, if they are aware, may not be able to track in enough detail each trade that is not in compliance.