On Apr. 9, UK FCA issued Market Watch on instrument reference data.
FCA issued Market Watch 78 setting out some recent supervisory observations covering completeness and accuracy of instrument reference data (IRD) under RTS 23.
Will interest recognized investment exchanges (RIEs), multilateral trading facilities (MTFs), organized trading facilities (OTFs) and systematic internalizers (SIs).
Follows UK FCA Oct. 2022 Market Watch 70 on data market oversight, see #149664.
Background
UK trading venue operators, SIs must provide FCA details of the financial instruments traded on their platforms, IRD is key to ability to conduct effective market oversight.
Regulator uses the data to validate and supplement the data received under RTS 22.
Issues with IRD impact FCA ability to monitor markets effectively, impacts other data.
Data Quality Processes
IRD submitting entities must have arrangements to identify incomplete or inaccurate data, report in timely manner, processes not limited to rejections/warnings received.
INS-128 warnings are generated by the market data processor (MDP) when IRD submitted by an entity under RTS 23 for a given instrument differs from values provided by relevant trading venue for same instrument, these are not rejections.
To identify potential data quality issues entities must include review of these warnings in processes, FCA lists most common rejection messages, number rejected in 2023.
Some firms repeatedly submit identical records after receiving a rejection message, could mean poor exception management processes, must manage rejections promptly.
Best Practice
FCA sets out best practice for invalid issuer LEI rejection message and for message regarding invalid instrument classification, refers readers to earlier Market Watch 70.
Also covers cancelled instrument reference data, if entity submits IRD to FCA in error, should cancel it, most IRD submitting entities have never used this functionality.
FCA has noticed dummy or default values in IRD submissions, this does not align with the relevant reporting requirements, use of such values expected to be exceptional.
Trading venues and SIs required to notify FCA promptly when they identify IRD that is incomplete or inaccurate, but only 135 forms received from 2018 to Feb. 2024.
FCA concerned some IRD submitting entities not notifying it when they identify issues.
Next Steps
Regulator may conduct further work on areas covered in market watch articles to ensure firms take appropriate action.
