If the UK leaves the EU without an implementation period, we expect firms, trading venues and ARMs to make reasonable steps to comply with their requirements under the Transaction Reporting Regime by exit day and any requirements they have to submit instrument reference data.
This information is designed to sit alongside our statement Brexit – what we expect firms and other regulated persons to do now.
It gives a high-level overview of what firms need to do now to comply with the onshored MiFID regime as it applies to transaction reporting. It also gives more detail about our internal project timetables (including IT build) and the industry testing schedule. Check our Brexit pages for further information as it becomes available.
Except where stated otherwise, all the following information relates to a scenario where the UK leaves the EU without an implementation period.
Replacing the ESMA FIRDS system for the UK
FCA FIRDS has been built to replace ESMA FIRDS in the UK.
ESMA’s FIRDS system records all those instruments reported by EU trading venues as being traded on them (TOTV) and helps firms, amongst other things, determine their reporting obligations.
We will begin feeding our new FCA FIRDS with live production data from early March to ensure that we have a full database of instruments by exit day. We also intend to publish an extract of ESMA data in FCA FIRDS, given that the scope of the UK transaction reporting regime includes instruments traded on venues in the EU27, regardless of whether they are also traded on UK venues.
Firms will be able to test submitting data to the new FCA FIRDS system in the Industry Test Environment (ITE) from 21 February 2019.
From 14 March 2019, firms will be able to test FCA FIRDS’s publishing solution, which enables firms to download full and delta reference files. Find out more.
How FCA FIRDS will work
FCA FIRDS is built on the new ESMA schema. However, to take account of possible changes in ESMA’s implementation timetable, the system has been built in such a way that, should ESMA’s schema change be delayed, firms can continue to submit under the old schema until the new schema is introduced by ESMA. This means firms will not need to report against two different schema; for ESMA and the FCA. If ESMA moves over to its new schema for FIRDS after the UK leaves the EU, we will change our schema to coincide with ESMA’s change.
Our aim is to help firms by making our system as similar as possible to ESMA’s. The schema for the two systems will be identical on day one. However, some fields within the system will not work in the same way as currently. The most important of these are:
- Relevant Competent Authority (RCA) – will no longer be meaningful. The RCA field for instrument reference data submitted to us will default to GB.
- FCA FIRDS Master Data (the record of the most relevant market) is likely to be different from ESMA’s, given that ESMA will use master data from EU venues.
The functionality of the search engine is comparable to ESMA’s, but we will be using a different search engine, Amazon’s Elastic Search.
We have considered suggestions made by firms to improve the ESMA FIRDS system by changing some fields or the reporting logic. In most cases the benefit of introducing these changes is outweighed by the uncertainty it would cause, given short timeframes. However, we will give firms more certainty around the timing of issuing delta files and full files. This will improve firms’ experience of the system without deviating from ESMA’s approach.
Mechanics of the switch-over and timing
Were the UK to leave the EU without an implementation period, we would switch off our feeds to ESMA FIRDS on exit day. We will give more information about the switchover from ESMA FIRDS to FCA FIRDS in due course.
In the event that there is a withdrawal agreement that includes an implementation period, we will publish further information on whether FCA FIRDS will be used during this period.
Were an implementation period to be agreed that allowed UK firms and venues to continue to be subject to the EU transaction reporting regime, we would envisage that we would not switch over to FCA FIRDS. In this scenario, firms would continue to use the ESMA FIRDS system.
In CP18/28 we outlined some of the main changes to firms’ reporting obligations under the transaction reporting regime that arise because of Brexit. For example, UK trading venues will have to report transactions carried out on their venue by EEA members except for UK branches of EEA firms; EEA firms with a UK branch operating under the temporary permissions regime will have to report relevant transactions to us under the transaction reporting regime.
We expect that firms used to transaction reporting in the UK will see very little change to the underlying mechanics of reporting or the reporting logic, which is key to achieving as smooth a transition as possible.
What firms need to do
The three main categories of firms that will need to take action to prepare for exit day are:
- All firms who want to access FCA FIRDS to support their transaction reporting obligations will need to connect (either directly or via a third party) to FCA FIRDS publication tool. The timetable for industry testing is outlined above.
- UK trading venues will need to prepare to transaction report for transactions on their venues by their EEA members (who are not operating through a UK branch), who report to their home state within the EEA and who will become third-country firms as regards the UK after the UK leaves the EU.
- EEA firms who operate through a UK branch, and who enter the temporary permissions regime, will need to begin preparations to either connect directly to the MDP or use an Approved Reporting Mechanism (ARM) to be able to transaction report to the FCA by exit day. Some firms may need to change their ARM, if their current ARM is not planning to make use of the temporary authorisation regime for EEA Data Reporting Service Providers (DRSPs) or is not connected to the FCA’s Market Data Processor by exit day. A list of all ARMs authorised by us can be found on our DRSP webpage. We will update this list for EEA DRSPs that have notified us of their intention to use the temporary authorisation regime and that have onboarded to the MDP system. However, if a firm is unsure whether its ARM intends to operate in the UK after the UK leaves the EU it can also contact its ARM directly, as the ARM may be in a better position to give their clients timely information about their intentions. We would remind firms that connecting to an ARM can take several weeks so if firms are looking to make a change to comply with their UK reporting obligations they should make contact with ARMs in good time.
Firms are best placed to understand their own needs and requirements. The above list is not exhaustive of the circumstances in which actions will be needed. Each firm will need to consider whether, in the light of their own specific business model, there are actions they need to take.
We are conscious of the scale, complexity and magnitude of some of these changes and consequently intend to act proportionately. This means that, in the event that there is no implementation period, we will not take a strict liability approach and do not intend to take enforcement action against firms and other regulated entities for not meeting all requirements straightaway, where there is evidence they have taken reasonable steps to prepare to meet the new obligations by exit day. Firms who are not able to comply fully with the regime at the time of the UK’s withdrawal from the EU will need to be able to back-report missing, incomplete or inaccurate transaction reports as soon as possible.