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MiFID II Transaction Reporting Q&A: How to Extract, Reconcile and Manage Your Data with AQMetrics ARM

The MiFID II transaction reporting framework has transformed the landscape, placing a significant burden on firms to manage and process vast volumes of information. Amidst recent inquiries regarding MiFID II ARMs (Approved Reporting Mechanisms) and firms’ data access requirements, we delve into the strategies for extracting, reconciling, and maximising the value of your MiFID II transaction reporting data using the AQMetrics ARM.

markets in financial instruments directive.

1. Why is it so important to have access to historic data?

Firms are increasingly focused on reconciliation. This in turn is identifying inaccuracies in past reporting and causing a need for back reporting. However, many ARMs only provide access to 6 months of historic data. This is going to present challenges when both reconciling and back reporting.

2. What are some of these challenges then?

The vast majority of ARMs are still limiting client firms’ access to their own data. Often, the only way to truly access the data in the ARM for reconciliation is to access data via a 3rd party reporting aggregator or consolidator. That just shouldn’t be the case. Others may only allow access to the most recent 6-9 months of data. With MiFID II transaction reporting requirements in place since 3 January 2018, firms need access to the full historic data set. Often firms are levied with additional fees to access archived data. This is problematic in our view and one of the main reasons AQMetrics is the only ARM to give firms full access to the firms’ own data – in fact, we encourage it. It’s their data after all.

3. What are your recommendations for reconciliation and back reporting then?

For reconciliation, you need to think about data in 3 locations:

  1. Sources systems (e.g OMS)
  2. The ARM
  3. NCA portal

If a firm can reconcile source system trades against the ARM and check the ARM transaction reports against the NCA portal, it achieves an end-to-end three-way reconciliation. In addition, it’s recommended that you select a representative sample of transaction reports and check each data point. You are looking for mismatches in buyer or seller LEIs, changes in price, inaccuracies in trading date or time, and other transaction report data. At AQMetrics, we allow firms to upload CSV files from their front office systems and produce a reconciliation report for the first leg of the reconciliation. We also allow firms to upload the XML sample from the NCA portal for the second leg of the reconciliation.

4. There is a source of rich transaction data in the ARM, often coming from multiple front and middle office data sources. How can firms maximise the benefit of this?

At AQMetrics, we recognise that this vast trove of data holds real value to firms – especially when they use business intelligence (BI) tools to unlock key operational and reporting insights. The ARM is often a centralised source of transaction data, fed by multiple source systems in the MiFID firm. This is where APIs come in. If the ARM provides an API and flexible data extracts, firms should seek to integrate this rich data source with third-party business intelligence tools. With open access to transaction reporting data, firms can intelligently monitor for patterns in their trade data, performing time series analysis, shining a light on data quality and execution patterns month-on-month, and year-on-year. Our customers are also using this data-driven feedback to handle NCA queries, perform in-house data quality continuous improvement, and implement alerting and monitoring systems. This is across all levels: there’s better monitoring in the middle office, but there’s also more efficient compliance and reporting in the back office. Overall, too, this should give better audit abilities and control over data going forward. So we are definitely of the view that ARMs should be encouraging firms to access their own data, rather than limiting this. We don’t want to offer siloed solutions for single problems. When we designed the MiFID II solution on the AQMetrics platform, we designed it with an eye on the horizon, solving for future regulatory needs and future business needs.

5. How do you give firms access to their data then? And how can they plug it into their BI tools?

Access is very simple. It will usually be given through flexible queries and daily exports, although there is flexibility if firms want the data at different intervals. In terms of integrating with other tools, we offer a RESTful API so that firms can connect to third-party business intelligence tools, such as Microsoft Power BI or Tableau. We are currently working with several multi-jurisdictional MiFID firms to integrate transaction report data across product types and jurisdictions with in-house business intelligence tools.