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The European Securities and Markets Authority (ESMA) has reported an improvement in data quality in its Data Quality Report.
The report, which gathered data from the European Markets Infrastructure Regulation (EMIR) and the Securities Financing Transactions Regulation reporting regimes, finds that the coordinated supervisory actions by ESMA and the National Competent Authorities (NCAs) had ‘significantly enhanced’ data quality in 2021.
Compared to the previous year, misreporting of valuations under EMIR fell by around 50 per cent across the reporting firms subject to the review.
Despite supervised trade repositories (TRs) complying with their EMIR obligations, the analysis identified some shortcomings in the data that were provided to the authorities, which require TRs to reinforce their efforts in this area.
The report finds that less than 10 per cent of reported derivatives tend to be reported late by the counterparties and more than 20 per cent do not receive updated valuation daily, as required by EMIR.
It also identifies shortcomings in reconciliation functions, with around 5 million of reconcilable derivatives remaining unpaired.
Since its start on 13 July 2020, the SFTR reporting regime has shown comparable results to EMIR across all data quality metrics. The report concludes that 10 per cent of SFTs reported late (after T+1). The reconciliation rate of loan and collateral data has been low but has now increased to around 40 per cent and 30 per cent, respectively.
ESMA’s analysis concludes that certain data reconciliation tasks will require additional attention from reporting entities.
In particular, the report suggests that data quality could be enhanced if counterparties used the same data set and identifiers for the reported data in their internal risk management processes.
It did find, however, that ESMA and national competent authorities achieved significant improvement in data quality and accessibility through use of ISO 20022 XML end-to-end reporting.
