Transaction reporting continues to challenge, says Cappitech

urvey highlights inefficiencies and errors as reason to change reporting, with new and changing regulations, market changes and the key concerns that arose due to the huge changes affecting everyone this year

Cappitech’s third annual global regulatory reporting survey finds that the majority of firms (65%) have had to change their reporting in the last 12 months, mostly due to inefficiencies and errors. Alongside this, four key issues are affecting firms that need to comply with regulatory reporting requirements: New regulations, changing regulations, the CME’s decision to exit the transaction and regulatory reporting market, and Coronavirus.

“Transaction reporting continues to cause challenges for individual firms, even if those challenges vary across the market. This year, unexpected changes in the form of CME and Deutsche Borse’s departures and, of course, the global health crisis, have added additional complexity, impacting costs and efficiency and driving additional changes in how these firms manage their reporting,” comments Ronen Kertis, Cappitech CEO.

The report highlights some changes since 2019, with reconciliation in particular having improved markedly. 67% are now performing this required task vs just 55% last year. There’s also been a notable increase in firms receiving regulator feedback with 54% have received a response in the last 12 months vis just 32% in last year’s survey. Regulators have long made it clear that while they would be lenient, their involvement and requirement for accuracy would continue to increase and the survey bears that out.

Less positive changes can be seen in best execution however with 66% of respondents saying they have not implemented a systematic method to monitor this, despite it being a requirement. This compares unfavorably to last year when 61.4% were not doing so. However, there have been many distractions in 2020, and the survey also highlights that many firms want, and are planning, to implement best execution in the next 12 months. Additional findings include:

Business Continuity Plans (BCP): On a positive note, the survey found that BCPs mostly stood up well during the global crisis, with 72% having already incorporated regulatory compliance and reporting into their existing plans and 71% finding these to be effective during the pandemic. In particular, the use of technology and remote working performed well.

Brexit: Similarly, firms appear to be well prepared for Brexit, including a no-deal, with 68% saying they understood the effect of a no-deal on their marketing and client activities, while 71% have already decided on mitigation measures. However, Brexit was cited by a significant number as the key regulatory challenge for the next 12 months.

Regulatory reporting improvements: Planned improvements for regulatory reporting include better data quality, enhanced reporting knowledge and expertise, prioritizing reporting processes and efficiency and enhancing Completeness, Accuracy and Timeliness (CAT) reporting, although there are concerns about firms’ ability to do this in light of reduced budgets and smaller businesses following the Coronavirus pandemic. When assessing solutions to achieve this, firms see merging reporting to single platforms and risk management as key decision-making drivers.

“Survey respondents and our clients appear to be united in their desire to drive efficiency and accuracy while maintaining costs and reducing longer term risks as a result of regulatory or market changes. Increased engagement with regulators, TRs, ARMs and vendors, all working together, can contribute to this improvement in reporting efficiency. Certainly, taking the results of this survey Cappitech will continue to aim to meet as many of these concerns as we roll out new services,” concludes Kertis.

The survey was conducted in Autumn 2020 and involved 89 respondents from banks, brokerages, asset managers, hedge funds, corporates and other institutions based all over the world.

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