Data is an extremely valuable asset for every single company. It is the key factor, which fully describes and outlines the performance of the business. The reason why data is extremely important is that it carries the whole information about the company, employees, and documentation.
Data for the company is just like an ID for the person. Every company and institution is very careful with the safety and security of extremely sensitive data. This is something which is always the top priority for every business and every company. Many tools and regulations have been introduced especially during the past time in order to prevent any kind of hacking and attacks on personal data of the company or institution.
Due to technological advancements in the financial industry that ensure cross-country sign-ups, it has become a bit too tedious for regulators to verify the legality of company activities.
This is not necessarily an issue that only ESMA-regulated brokers are facing. This is a cross-industry topic that every FX company has to face on a daily basis. It’s particularly an issue for medium-sized brokerages as the percentage of resources dedicated to ensuring these policies is usually much higher compared to a large conglomerate for example. Axiory, a mid-sized brokerage is a perfect example in this case. The broker has no connection with ESMA but this doesn’t mean that the quality of data security is in any way lower. But here’s the main difference. Axiory, as a company, although under other forms of regulation needs to ensure the security of its data, still has room to over-do it in a sense. Whereas ESMA mandates that brokers under its regulation over-do it by default.
While other big organizations and authorities try to implement effective regulations and laws in order to protect businesses and people from breaching the laws and usage of personal information. So far it is hard to create the laws and the terms and regulations for every single country and to make them work for everyone, but specific authorities take the responsibility to make common sense and a common framework. The European Securities and Markets Authority is most definitely leading in that sense.
Via implementing new measures it is necessary to remember that the new regulations should not limit the transaction and data exchange process, on the opposite they should simplify the process while also make it more secure and safe.
The 2021 Work Program
As already mentioned ESMA is one of the most important actors in the industry, who has the right to write the final world and put the dot at the end of the sentence. They have recently released the working plan for the businesses of the next year. We all understand the complexity of the current year and the global market, yet it should not assist in illegal data exchange processes.
Trade and transaction reporting have featured prominently in the upcoming Work Program of Europe’s supranational corporate regulator. Their main concern, as usual, remains to be the data quality. This is the main objective for ESMA when it comes to transaction reporting. The report split ESMA’s focus and the expectations under both the EMIR, European Market Infrastructure Regulation, and STFR, Sell The F’ing Rip regimes.
For EMIR, the main regulator has stated that the supervisory approach is data-driven and risk-based. Data-driven industries, in general, take the most advantage over them and play a huge role in the formation and shaping the plans and strategies. Though, they are usually the most risk-based as well. It was said that in 2021 ESMA’s main supervisory objective will still be the enhancement of the quality of the data reported to trade responsibilities under EMIR. The authority will strictly continue the same strategy and policy on implementing the Data Quality Action Plan, a program that was initially launched back in September of 2014. The main aim of the program was to standardize and improve the data received by regulators all across Europe.
In the statement, it was also explained that the Data Quality Action Plan, which is also known as the DQACP will provide accessibility, accuracy, and integrity to EMIR reports. It will also identify and allow EMIR reconciliation across all EU countries. Data security and safety is a topic that is interesting and extremely vital for most of the industries, including the forex market. The data transaction stands a problem, especially while facing a number of regulatory authorities, due to the massive operation globally. Data gathering directives are also one of the main points in the difference between forex and stocks as a whole.
The biggest effort by ESMA will be taken and made within the next 12 months, which are going to be the most vital and important for the whole success of the project. During this process, EMIR will continue reporting trade action from the pre-Brexit to post-Brexit legal entities. It is clear that many companies shall also make the whole upgrades of their IT infrastructure and make some massive changes.
ESMA also voiced some concerns on firms’ general approach to the IT starey and IT outsourcing. A warning to firms to avoid risk-based actions has been officially public, which means that it is the full responsibility of the company to take all of it into consideration. Not only ESMA is trying to voice the concern loud enough for every financial and IT institution to hear it, but also different representatives of the industries. Just like anywhere else in the industry, in the Forex Market, it is extremely important to keep safe and to avoid additional risks, as the market is complex and risky itself. Thus, many brokers have not once warned the traders to take all of the legal allegations into account and to follow the safety guidelines offered by the official regulatory authority.
Big companies and authorities, like ESMA, promise to hand out the helping hand for those who are in need and to assist in the smooth transitioning process, which includes the registered trade repository withdrawing its registration. It was also mentioned that it expects its supervisory work will focus on performing re-validations on SFTR submissions to ensure reports are in line with validation rules, assessing completeness and accuracy of SFTR Trade State and Activity reports.
The stable trade repositories will remain under the main focus, especially during the COVID-19 and Brexit period. All participants are reminded that there is a close monitoring process ongoing, which defines the IT performance and the possible capacity of process making. The changes have been implemented in the second and third quarters of the current tea. The guidelines have been set and the next 12 months will be the most definitive of the success.