Market Watch 70

Newsletters Published: 03/10/2022 Last updated: 03/10/2022

Newsletter on market conduct and transaction reporting issues.

October 2022

About this edition

In this Market Watch, we outline recent observations on the transaction reporting and instrument reference data regimes. These will be of interest to investment firms, credit institutions, trading venues, systematic internalisers, and approved reporting mechanisms. Our objective is to provide firms with information necessary to uphold and improve the quality of their transaction reports and financial instrument reference data submissions.

Transaction reporting

Transaction reports play a key role in our ability to conduct effective market oversight. We use them to help us detect, investigate and prevent market abuse, combat financial crime, support conduct supervision, and examine market events, in combination with other data and intelligence that we gather, including order book data. Data must be complete, accurate, and reported to us in a timely manner.

We have worked closely with firms since MiFID II was implemented in 2018 to improve transaction reporting data quality. We have been encouraged by the progress made. More firms are demonstrating awareness regarding the importance of arrangements that identify and remediate reporting issues proactively and promptly. These arrangements must include regular reconciliations of transaction reporting data extracts with front-office records.

The table below shows the number of firms accessing our Market Data Processor (MDP) Entity Portal to make a transaction reporting data extract request. Firms not making regular requests are reminded this is a requirement under Article 15(3) of RTS 22. We do not expect firms to rely on us, or on MDP validation rules, to identify issues.


Firms making data extract request 









The reconciliations conducted by firms continue to identify data quality issues. The table below shows the number of firms that have submitted a transaction reporting breach notification to us since 2018. These notifications are required by Article 15(2) of RTS 22 and SUP 15.3.11R.


Firms submitting breach notifications 









While some firms have shown understanding of their obligation to bring errors and omissions in their transaction reports to our attention, our data quality alerts suggest many are not conducting sufficient checks on their data. Reconciliations should not be limited to certain fields, or to data samples that do not adequately reflect the trading scenarios and asset classes traded by a firm.

We have also observed variable levels of information in the breach notifications we receive. Some firms include limited details and unhelpful references to proprietary reporting systems or processes. Notifications should be comprehensive, including adequate background to facilitate a full review of the incident. Best practices include the provision of examples to show how a field was misreported, and how this will be corrected going forward.

National identifiers

In Market Watch 59 and 62, we highlighted that 1st priority national identifiers must be used wherever available to identify natural persons in transaction reports. Despite our warnings, we continue to see firms failing to conduct sufficient due diligence when onboarding clients to obtain these identifiers. This has been particularly common amongst firms offering services to retail clients electronically, such as via mobile-based applications.

Best practices in this area include:

  • Ensuring transactions are not executed for clients until an identifier has been subject to internal review and validation. This should include checking that the format of the identifier conforms to the standard outlined in the ESMA Q&A on MiFIR data reporting.  
  • Reviewing identifiers received to ensure no duplicates exist within a database of clients. 
  • Requiring explanations from clients that do not provide a 1st priority identifier.

Principal firms

Confusion has arisen regarding the identification of principal firms, appointed representatives (ARs) and tied agents in transaction reports. For transaction reporting purposes, we view an AR as its principal firm. This means that when a transaction is executed by an AR providing the investment service of reception and transmission for a principal firm that is subject to transaction reporting obligations, the principal firm should be identified in applicable fields of its transaction report, such as in the executing entity field. The AR should not be identified.

We have identified concerns with the care taken by some principal firms in overseeing the activity of ARs. In some cases, this has led to the submission of inaccurate transaction reports by principal firms. Principal firms are responsible for ensuring that their transaction reports are complete and accurate, and for implementing an adequate systems and controls framework to identify potential data quality issues, including where caused by an AR.

Branch reporting

UK branches of third country investment firms appear to be taking a variety of approaches to determining when they are ‘executing’. While recognising the complexities attached to conducting this assessment for the purposes of an entity that is a branch, we do not expect firms to determine their reporting obligations based on the geographic location of a trader alone. In addition to the criteria in Article 3 of RTS 22, other factors should be considered, such as the location(s) of the branch that received the order from the client, the branch that oversaw the individual responsible for making the investment and execution decisions, and the branch whose membership was used for executing transactions on a trading venue.

We expect UK branches of third country investment firms to report whether the investment firm is covered by directive 2014/65/EU (Field 5, RTS 22) with ‘TRUE’. This allows us to distinguish the reports they submit from those submitted by trading venues under Article 26(5) of UK MiFIR for transactions executed on their platforms by third country firms, which should contain ‘FALSE’ in this field.

Other transaction reporting issues

  • We have identified more firms misusing the ‘INTC’ reporting convention. Examples include reporting an order from one client executed in multiple fills, using ‘INTC’ to signal an internal trading account, or failing to report both the market side and the client side of a transaction.
  • Trading venues are responsible for the quality of the transaction reports they submit. Some trading venues have sought to place this responsibility on their members. Trading venues should have robust processes in place to ensure the timely receipt of information from members necessary for them to submit complete and accurate transaction reports.
  • Some firms continue to report a market identifier code (MIC) when they transmit an order to an executing broker, who in turn executes the transaction on a trading venue. The venue (Field 36, RTS 22) should be populated ‘XOFF’ by investment firms who are in a chain and who do not access the venue directly. This is explained in Section 5.4.2 of the ESMA Guidelines on transaction reporting.
  • For transactions executed in financial instruments that are not admitted to trading or traded on a trading venue (eg CFDs), the instrument full name reported should contain a clear description of the financial instrument traded (eg Vodafone CFD).

Instrument Reference Data

Article 27 of UK MiFIR requires trading venues to submit instrument reference data to us for financial instruments admitted to trading or traded on their trading venues. Systematic internalisers (SIs), including UK branches of third country firms where the UK branch conducts SI activity, are required to submit instrument reference data for reportable instruments that are not admitted to trading or traded on a trading venue, in which they have opted to be an SI.

We validate and publish instrument reference data on FCA FIRDS. FCA FIRDS also includes instrument reference data reported to ESMA by EEA trading venues and SIs. This consolidated dataset is used to validate the transaction reports we receive. Inaccurate or incomplete instrument reference data limits our ability to conduct effective market oversight. It can mislead us regarding the nature of a financial instrument traded and lead to the incorrect rejection of transaction reports.

Systems and controls

Trading venues and SIs should have arrangements in place to enable them to identify incomplete or inaccurate instrument reference data. These arrangements are required by Article 6(2) of RTS 23. They should ensure data is being submitted in line with Table 3 of RTS 23 and in accordance with ESMA guidelines and Q&As.

Our MDP system provides feedback for each reference data file received. Trading venues and SIs should ensure they have procedures in place to review feedback files, including any warning messages received, which notify the submitting entity that its record differs from the master record used to validate transaction reports. These procedures should include investigating why records or files have been rejected. Submitting entities should not amend their reference data to match the master record without first confirming its accuracy.

Where a trading venue or SI identifies incomplete or inaccurate instrument reference data in its submissions, we expect to be notified promptly via the submission of an instrument reference data errors and omission notification form. Corrected data should be submitted without delay. 

Systematic internalisers

Under Article 27(1) of UK MiFIR, SIs should only report instrument reference data for instruments in which they are an SI and that are reportable under Article 26(2)(b) or (c) of UK MiFIR. We have identified SIs submitting instrument reference data for instruments that are admitted to trading or traded on a trading venue and that are reportable under Article 26(2)(a) of UK MiFIR. We have also identified SIs submitting instrument reference data for instruments that are not reportable under Article 26(2)(b) or (c) of UK MiFIR, either because there is no underlying (for example, equities) or because the underlying is not admitted to trading or traded on a trading venue. This can lead to confusion for investment firms as the scope of transaction reporting requirements is determined by whether an instrument is admitted to trading or traded on a trading venue, and not whether it is reported by an SI or is in FCA FIRDS.

Other instrument reference data issues

  • For reporting instrument reference data under UK MiFIR, ISO 10962 CFI codes issued by the relevant National Numbering Agency (NNA) should be used. We have identified trading venues and SIs submitting instrument reference data where the CFI code (Field 3, RTS 23) does not match that of the NNA. Trading venues should have arrangements in place to ensure that the CFI reported matches that of the NNA.
  • Trading venues and SIs should only populate the issuer or operator of the trading venue (Field 5, RTS 23) with their own LEI when they create or issue the financial instrument. We have identified cases where trading venues and SIs report their own LEI for instruments where the LEI of the issuer is available.
  • The termination date (Field 12, RTS 23) should be populated with the date and time the instrument is expected to cease trading. This date should be earlier than or equal to the maturity date (Field 15, RTS 23) or expiry date (Field 24, RTS 23), where applicable. We have identified trading venues and SIs failing to populate the termination date even after the instrument has matured or expired.
  • Some trading venues have submitted data for instruments that are not commodity derivatives with the commodities or emission allowance derivative indicator (Field 4, RTS 23) populated ‘TRUE’. This can cause investment firms to receive a CON-460 transaction reporting validation error for failing to populate the commodity derivative indicator. In these cases, we have identified good practice from investment firms who contact the trading venue on which the transaction was executed to ensure the instrument reference data is accurate. However, responsibility remains with trading venues to submit accurate data and have procedures in place to identify potential shortcomings.

Additional information is available on our transaction reporting webpage.

You can send queries regarding transaction reporting and instrument reference data to us at:  [email protected].