Transaction Reporting

Transaction reporting refers to the obligation of financial institutions to report details of executed transactions to regulatory authorities. This includes information about the traded instruments, parties involved, prices, and volumes.

The main regulations requiring transaction reporting include MiFID II (Markets in Financial Instruments Directive) for securities trading, EMIR (European Market Infrastructure Regulation) for derivatives, and SFTR (Securities Financing Transactions Regulation) for securities financing transactions.

Transaction reports must include comprehensive information such as instrument identification (ISIN), trading date and time, price, volume, buyer and seller identification (LEI), trading venue, and transaction type. The exact requirements depend on the applicable regulation.

Under MiFID II, transactions must be reported by the end of the following business day (T+1). For EMIR, the deadline is also T+

1 for most derivatives. Timely reporting is critical to avoid regulatory sanctions.

An ARM is an entity approved by regulatory authorities to receive transaction reports from financial institutions and forward them to the competent authorities. Using an ARM can simplify the reporting process and ensure compliance with technical requirements.

The Legal Entity Identifier (LEI) is a unique 20-character code that identifies legal entities participating in financial transactions. It is mandatory for transaction reporting and enables clear identification of all parties involved in a transaction.

Transaction reporting can be automated through specialized software solutions that extract data from trading systems, validate it, enrich it with required reference data (such as LEI and ISIN), and automatically transmit it to ARMs or trade repositories.

Common challenges include data quality and completeness, timely provision of reference data, handling of complex instruments, reconciliation of reported data, and keeping up with regulatory changes. Professional support can help overcome these challenges.

Reporting errors must be corrected as quickly as possible through cancellation and resubmission reports. Many ARMs and trade repositories offer reconciliation services that help identify and correct errors. Systematic errors can lead to regulatory sanctions.

Data quality is ensured through multi-level validation processes including format checks, plausibility checks, completeness checks, and reconciliation with reference data. Automated validation rules and regular quality reports help identify and correct errors early.

Trade repositories are central databases that collect and maintain records of derivatives transactions. Under EMIR, derivatives transactions must be reported to registered trade repositories. They provide regulatory authorities with transparency into derivatives markets.

Transaction reporting (MiFID II) covers all financial instruments traded on regulated markets and MTFs, while trade reporting specifically refers to derivatives reporting under EMIR. Both have different requirements regarding content, deadlines, and recipients.

Costs include fees for ARMs or trade repositories, software licenses for reporting systems, personnel costs for operation and monitoring, and potentially consulting costs for implementation. Automation can significantly reduce ongoing operational costs.

Monitoring includes daily checks of reporting completeness, validation of data quality, monitoring of deadlines, reconciliation with internal systems, and analysis of error rates. Automated monitoring systems can send alerts for anomalies.

Violations can result in significant fines, public warnings, restrictions on business activities, or in severe cases, withdrawal of licenses. Regulatory authorities increasingly monitor compliance with reporting obligations and impose sanctions for violations.

Complex instruments such as structured products or exotic derivatives require special attention in reporting. Often additional reference data is needed, and classification can be challenging. Specialized expertise and appropriate systems are essential.

Reference data such as ISINs, LEIs, MICs (Market Identifier Codes), and CFI codes (Classification of Financial Instruments) are essential for correct transaction reporting. They must be current and accurate to ensure reporting quality.

OTC (Over-the-Counter) transactions, i.e., transactions outside regulated markets, must also be reported under MiFID II and EMIR. Special attention must be paid to correct identification of counterparties and instruments.

Initial reporting refers to the first report of a transaction, while lifecycle reporting covers all subsequent changes such as modifications, partial executions, or early terminations. Both types of reporting are mandatory and must be complete.

ADVISORI offers comprehensive support from initial setup of reporting processes, through selection and implementation of appropriate systems, to ongoing operation and monitoring. We ensure your reporting processes are efficient, reliable, and compliant with all regulatory requirements.