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ESMA Report Calls for Improvement in EMIR Data Quality, Monitoring of SFTR Data

The European Securities and Markets Authority (ESMA) has published a report on European Markets Infrastructure Regulation (EMIR) and Securitised Financing Transactions Regulation (SFTR) data quality – and it’s not all good news. While progress has been made, more effort is needed by national competent authorities (NCAs) and ESMA to further improve EMIR data quality.

The Data Quality Report is the first review of data quality since the introduction of the EMIR and SFTR reporting regimes and will be repeated on an annual basis going forward. It reviews the quality of data reported by trade repositories (TRs) and gives an overview of actions taken by ESMA and NCAs to improve quality.

EMIR data quality

The report finds good progress has been made in recent years in improving the quality of EMIR data, which allows it to be used for regulatory and supervisory purposes. ESMA and the NCAs have worked closely to achieve this and carried out numerous activities to improve data quality.

However, the analysis of reported data indicates that there are a significant number of derivatives that are being reported late or not in line with the EMIR format and content rules, as well as derivatives that do not reconcile or are not reported at all.

Based on early 2021 data, the report shows:

  • Around 7% of daily submissions are being reported late by counterparties
  • Up to 11 million open derivatives did not receive daily valuation updates
  • According to ESMA estimates, there tended to be between 3.2 and 3.7 million open non-reported derivatives on a given reference date during 2020
  • Around 47% of open derivatives (totalling about 20 million open derivatives) are unpaired.

Anneli Tuominen, interim chair at ESMA says: “While progress [on data quality] 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.”

SFTR data quality

Considering SFTR reporting started relatively recently, ESMA presents a limited overview of SFTR data quality in terms of key data quality indicators, such as rejection rates, as well as an overview of the data reporting landscape. It states that in view of the complexity and scale of SFTR reporting, it is important that all relevant stakeholders – counterparties, TRs, NCAs and ESMA – set aside sufficient resources to monitor data quality thoroughly.

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