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Another Delay to UK FSA’s AII Deadline for Derivative Transaction Reporting

The UK Financial Services Authority (FSA) has just announced yet another delay to the go live date for transaction reporting using the Alternative Instrument Identifier (AII). The deadline was delayed from November 2008 to the first quarter of 2009, then another announcement in February this year delayed the deadline by which approved reporting mechanisms (ARMs) must adopt AII codes until 21 September. Obviously, this third deadline has not been met and ARMs now have until “early” February 2010 to get ready.

Rather than being caused by a lack of industry readiness, these delays have resulted from the fact the FSA is not yet ready to start accepting the new AII reports. The regulator indicates it has experienced a “number of difficulties” in rolling out its system for processing these reports and has therefore been forced to engage in a “re-planning exercise”.

The deadlines have now been staggered so that the FSA will be ready to start accepting AII reports in February, but it will not be mandatory for firms to report AII transactions until early April. The FSA has confirmed that in the interim period it will take no action against firms who are unable to meet the February date for AII transaction reporting. The regulator has also set up a number of industry support groups and resources, including hosting a new Transaction Reporting Forum, which covers AII and general transaction reporting quality issues, in order to help firms comply.

The delays are indicative of the amount of work the regulator is currently engaged in; other competing priorities such as the incoming liquidity risk measurement regime must be causing conflicts of resources.

The Committee of European Securities Regulators (CESR) had originally wanted each competent authority (CA) to collect this information and share relevant reports with other CAs by November 2008, one year after MiFID went live. However, the FSA and ARMs have found the practical reality of implementation is much harder than first thought. Industry members have said they need more time to build, test and implement the required system changes in order to meet AII transaction reporting requirements.

The FSA has previously stated that it is worried that rushing implementation could adversely impact the quality of these transaction reports. The wider testing window will also allow end to end testing between ARMs and their client firms.

The key objectives of the FSA’s AII project are to meet MiFID obligations for reporting all AII derivatives transactions in an efficient and secure manner. Additionally, all reference data must be obtained in order to understand, validate and route transaction reports to the relevant CA according to MiFID’s criteria.

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