ESMA report underlines need to bolster EMIR data quality

A European Securities and Markets Authority (ESMA) report has found improvements are needed to improve European Markets Infrastructure Regulations (EMIR) data quality.

The ESMA report covered both EMIR and Securitised Financing Transactions Regulation (SFTR) data quality, and is the first of its kind since the introduction of the EMIR and SFTR reporting regimes. It aimed to cover the progress made to date in strengthening EMIR data quality for regulatory and supervisory use.

The report concluded that while good progress had been made in recent years in improving the quality of EMIR data, further efforts were required by national competent authorities (NCAs) and ESMA to strengthen EMIR data quality.

Cited as a needed improvement is that there are a significant number of derivatives that are being reported late and not in line with the EMIR format and content rules, alongside derivatives that do not reconcile or are not reported together.

Furthermore, the report found – based on early 2021 data – around 7% of daily data submissions are being reported late by counterparties, while up to 11 million of open derivatives did not receive daily valuation updates.

According to ESMA estimates, there also tends to be between 3.2 and 3.7 million of open non-reported derivatives on a given reference data during 2020. Around 47% of the 20 million open derivatives were found to have been unpaired.

For SFTR, the report highlighted as the securitised financing reporting regime was only recently launched, it presents a ‘limited overview’ of SFTR data quality in terms of key data quality indicators, including rejection rates and an overview of the data reporting landscape.

The report, however, stated it was important that all relevant stakeholders – including NCAs counterparties and ESMA – set aside enough resources to continuously monitor data quality thoroughly.

Brexit was also found to have had a substantial effect on the reporting landscape of SFTR, with nearly a 50% decline in the number of open SFTs following Brexit. However, the number of open SFTs has experienced a growth spurt since.

ESMA noted it will publish its Data Quality Report annually going forward.

Interim chair of the ESMA Anneli Tuominen said, “The publication of the first ESMA Data Quality report provides transparency to stakeholders on ESMA’s and NCAs’ activities aimed at improving the quality of data reported by trade repositories. While progress has been made, the report also identifies the need for increased efforts by ESMA, NCAs, trade repositories and reporting entities to ensure good quality data that facilitates the monitoring of systemic risk and financial stability

“High-quality data is necessary to enable the effective use of data. Stakeholders need to be aware of the progress made towards better data quality and this annual report provides them with an important tool to monitor improvements to data quality.’’

The report can be read in full here.

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