MAP FinTech's response outline to the consultation
by George Markides, MAP FinTech MArket Insfrastructure Team
Background
As some of you may recall, in 2008 with the collapse of Lehman Brothers, the entire globe experienced what is now known as the Great Financial Crisis. The underlying causes of the GFC are still a subject of rigorous (and at times rancorous) debate among stakeholders, but there is one aspect that everyone agrees upon. The GFC spread across the world due to exotic derivative assets traded over the counter, bilaterally between market participants. Another main conduit of the GFC was the activities of non-financial institutions that were engaging in banking activities such as securitisations, entering into repo agreements, credit/margin lending activities etc., without said institutions being subject to the same prudential rules as banks with respect to capital cushions and loss-absorption capital (what we call shadow-banking).
On the derivatives side, such contracts were difficult to value (i.e. parties to such derivative contracts were unsure how much they were worth or if they had any value), there was insufficient (if any) hedging against counterparty default risk etc. Shadow banking participants were often engaging in uber speculative deals or were creating financial instruments (such as mortgage-backed securities) building up excessive leverage, and as these participants were closely interconnected with the financial system, their activities could (and did) have a profound impact on the system’s entire risk profile.
More importantly, competent authorities from across the world had no visibility on the activities of banks/investment firms/funds on OTC derivative assets (save for some snippets of information they might have occasionally gathered) and no visibility on the activities of shadow banking participants.
With the Pittsburgh declaration of 2009, the countries of the G20 proposed the creation of a framework to provide competent authorities across the world with an overview of firms’ exposures to OTC derivatives and shadow banking activities in order to pre-empt another such disaster.
Of this initiative, the EU conceived and implemented the EMIR and SFTR regulations that include a rigorous reporting element to authorities. These reports mandate reporting of when a firm enters/exits/amends a derivative/repo trade and daily updates on collateral and valuations.
At the same time, the EU was gearing towards overhauling its landmark MiFID directive, which allowed investment firms authorised and established in one member state to offer services across the EU without any additional barriers. The revised documents included an updated reporting obligation for firms that traded derivatives OTC (where those derivatives had as their underlying value a financial instrument traded on EU venues or an Index that was comprised of instruments traded on EU venues).
That reporting obligation under the revised MiFID amendment (MiFIDII/MiFIR) was intended for competent authorities to monitor market activities of firms, as well as a dataset to investigate Market Abuse cases, i.e. attempts to manipulate the market and insider dealing.
Reporting burden
As such while the three datasets were created from different necessities and were conceived with different intents in mind, they had significant overlaps with each other, so much so that firms found themselves reporting the same transaction more than once under different reporting regimes.
More crucially, different reports are fed to competent authorities via different channels, e.g. MiFIDII/MiFIR reporting is fed through authorised firms called ARMs, or directly to the Competent Authorities (if Competent Authorities had set up a data ingestion system – not all of them have done so), while SFTs and derivative trades are communicated via another set of authorised firms called TRs. Additionally under each regime the reporting format logic and validations differed, e.g. in MiFIR and SFTR the reports were made in XML format with each EMIR/MiFIR coming with its own XML schema and validation rules, while EMIR reporting could be reported either in .csv or XML (although since the advent of EMIR-REFIT in 2024 it's XML), EMIR again came with its own validation rules (distinct from the other 2).
This made compliance cost with the rules particularly onerous for firms as they had to deploy different IT solutions for each ruleset. Additionally, and considering the different channels required to submit the aforesaid reports, ARMs, TRs/NCAs, with each of these channels applying their own fees to firms some firms faced significant ongoing costs.
This was something that the Authorities became aware of during the years. For reference the UK’s FCA noted that some firms that occasionally trade with instruments that trigger an SFT/EMIR/MiFIR reporting obligation contact the FCA asking if they can send their occasional report via email.
ESMA offers relief in the long run
Against this backdrop, in June 2025, the European Securities and Markets Authority (ESMA) issued a call for evidence on the simplification of Financial Transaction Reporting. ESMA, in its background summary, recognised the overlaps and the inefficiencies of the current ruleset and requested feedback from market stakeholders for a drive to simplify the current ruleset. MAP FinTech responded to the call for evidence, and we’ve taken the view that can be summed up as follows:
A) Additional relief for small firms, investment firms that on occasion trade small volumes of derivatives, financial instruments, SFTs should be exempted from the reporting obligations. We’ve mentioned to ESMA similar examples from other jurisdictions to that effect. We believe that ESMA and the EU commission should identify the thresholds of what constitutes a small firm on the basis of operational complexity, size, trading volumes etc.
B) Removing the obligation for dual sided reporting, i.e. both parties to a trade should submit one report each. We propose that in a given bilateral contract, only one party should be reporting on the basis of strict reporting obligation rules.
C) Collapsing all reporting regimes (EMIR, MiFIR and SFTR) into a single report, whereby if a trade triggers a reporting obligation under e.g. both EMIR and MiFIR, only one submission should be made that accommodates both rulesets (Reporting Once Principle).
D) In the Reporting Once Principle, additional reporting regimes should be included such as e.g. APA publications espoused under MiFIR.
E) For the Reporting Once Principle, creation of a harmonised reporting template which will contain all necessary elements of each reporting regime, removing all duplicative values (e.g. Price exists in both EMIR, MiFIR and SFTR, in one form or another, we proposed that in the harmonised template this value should be present once covering all three).
As per ESMA any changes to the ruleset may take several years to devise and implement. MAP FinTech appreciates that this is a monumental undertaking that involves rewriting rules, adjusting reporting formats and channels, as well as giving ample time to market participants to adjust to the new requirements before they are implemented. As such MAP FinTech fully comprehends why ESMA has indicated that this will be a multiyear effort. Nevertheless, we welcome ESMA’s endeavours to untangle the reporting web and provide some much-needed respite to reporting firms.
