For firms subject to trade and transaction reporting obligations — such as the Securities Financing Transactions Regulation (SFTR), the European Market Infrastructure Regulation (EMIR), the Markets in Financial Instruments Directive (MiFID), and Dodd-Frank — since 2022, we have faced some of the most challenging times since the introduction of the G20 reporting mandates in 2012.
Last year alone, the industry was impacted by five regulatory changes, including EMIR (EU and UK), the Monetary Authority of Singapore (MAS), the Australian Securities and Investments Commission (ASIC), and the Financial Services Agency of Japan (JFSA), as well as the go-live of the Unique Product Identifier (UPI) in North America.
2025 looks a bit lighter with two big regulatory changes in Canada and from the Hong Kong Monetary Authority (HKMA). While we look at what is in scope for 2026, we see the US Securities and Exchange Commission’s (SEC’s) 10c-1a, MiFID III, and others.
These regulatory changes require significant investment in technology, data, and resources to ensure that current systems are upgraded to meet new requirements. These pose significant costs to financial firms that can range from hundreds of thousands to millions of dollars.
In parallel to the pace of regulatory change, the focus on data quality and enforcement by the regulatory agencies is heating up, and more pressure is piling on market participants to ensure that reporting is complete, accurate, and timely.
The combination of these factors has created numerous challenges in resourcing for these large-scale projects, which has proven to be problematic for many firms, not only in securing budget approvals but also in finding the right talent with the right skill set to help with these engagements, deliver on tight timelines, and ensure that the final product meets regulatory and business objectives. This is an industry-wide challenge across the North America, Europe, Middle East, and Asia regions.
Cappitech has been at the forefront of providing trade and transaction technology to help clients meet these obligations, and we continue to grow our capabilities through continued investment in our product and consulting offerings.
Controls
There are two concepts around controls worth exploring: pre-mortem and post-mortem checks.
In the pre-mortem view, a key consideration in tackling regulatory transformation projects is to understand the current state of play of the firm's regulatory reporting process, governance, and controls. Having an independent review of what is currently in place is critical to understanding whether or not you are meeting your existing regulatory obligations — look for improvements, and understand some of the best practices in the industry around a particular regulation, product, or even source system implementation.
These checks are relevant when there is a new regulation, a new product or business being launched, or a change to the business, such as a merger or acquisition. These reviews help clients to understand the impacts of these decisions on their trade and transaction reporting obligations. From these client assessments, we have witnessed a number of key observations.
Firstly, the client wants to take on a new trading relationship, but the counterparty does not offer delegated reporting. The client needs to assess the impact of reporting themselves, using a vendor, or possibly exploring a different trading partner.
Secondly, the client is launching a new fund and will be trading a reportable product. What data is required to be reported? How can that data be sourced, enriched, and reported?
Cappitech has been working with clients across sell and buy sides to help them understand their existing reporting infrastructure. These independent assessments or health checks provide a critical view into where there may be existing gaps, an overview of industry best practices, as well as checks on data accuracy, completeness, and timeliness.
For many financial institutions, the focus for trade reporting is ensuring that the next regulatory deadline is met and that trades are being reported to the appropriate regulatory endpoint.
However, it is critical that firms use the opportunity to take stock of their current infrastructure to ensure it is fit for purpose. When reviewing recent trade reporting fines issued by the Commodity Futures Trading Commission (CFTC), for example, most orders come back to supervisory deficiencies ranging from policies and procedures to not having sufficient personnel as well as the right controls in place.
The control framework surrounding trade reporting is no longer a ‘nice-to-have’ but is a critical component of a firm’s regulatory obligation, and ensuring that framework is tested and reviewed with a critical eye is paramount.
The other type of assessment is the post-mortem, which is focused on checking the quality of your reporting infrastructure, controls, and data post a regulatory implementation.
Any regulatory-driven mandate is usually implemented on a tight timeline, and certain items or requirements may get missed, pushed out as day-two items, or may need to be reviewed to ensure they are meeting the requirements set out in the rewrite, refit, or regulatory initiative.
Regulatory change
Marrying the obligations and challenges of the ‘run the bank’ model to now ‘change the bank’, a new set of considerations is needed for these large-scale transformation projects.
Can we reallocate resources from business-as-usual on a secondment basis to assist with the transformation? What expertise do we have internally that we can leverage? Should we hire a full-time equivalent (FTE) to help fill a critical gap in knowledge or expertise? What does that FTE do after the transformation project is completed? Should we bring in consultants to help get over the line?
These are all valid questions and considerations, and every firm will have a different answer based on its unique circumstances. One aspect that continues to arise is the ability to find the right talent, in the right location, at the right price. Yes, many firms still operate in a remote setting, but does having a consultant in Singapore help you when your project teams are located in New York?
The nature of trade and transaction reporting represents a unique resourcing challenge, as it lives at the intersection of technology, regulatory expertise, trading, operations, and compliance. How many resources are available in the market that have expertise across all of these functional areas and are available within your price range?
Cappitech has been supporting clients through these regulatory transformation projects with our technology solutions and consulting resources, such as providing expertise through business analysts and regulatory subject matter experts.
These large-scale transformation projects are complex, especially when there are multiple regulatory changes happening at the same time, such as the MAS/ASIC rewrite in 2024, or are completely brand new, such as SEC 10c-1a, particularly for those firms not in scope for SFTR and would be reporting securities lending transactions for the first time.
Cappitech’s reporting solution is used by over 600 clients around the world, ranging from global systematically important banks, regional banks, asset managers, hedge funds, brokers, and corporates. Cappitech Consulting is our consulting arm that helps clients with health assessments, regulatory interpretation, business analysis, and large-scale regulatory transformation projects.
New regulatory requirements are uniquely challenging to interpret the rules, understand how they apply to your particular business, and to initiate a project plan, all with the looming deadline or a compliance go-live. As it stands now, SEC 10c-1a is set to go live on 2 January 2026, which means there is less than eight months to accomplish a great deal during that time.
There is a strong likelihood that SEC 10c-1a will get delayed, which will be a much-welcome reprieve for the industry, but the challenges of implementing a new regulation are still there. As there are many similarities to the existing SFTR regulation, being able to leverage infrastructure and people resources that have the SFTR knowledge will be crucial for a successful go-live.
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