On 25 July 2023, the FCA published Market Watch 74, in which it describes some of its recent supervisory observations, covering RTS 22 transaction reporting and the submission of financial instrument reference data under RTS 23. These will be of interest to investment firms, credit institutions, trading venues, synthetic internalisers (SIs) and approved reporting mechanisms (ARMs).

Points highlighted in Market Watch 74 include:

• The FCA has identified a range of practices from firms where a natural person is assigned responsibility for an investment or execution decision. Some identify the individual trader, investment manager or portfolio manager making the investment or execution decision at a transaction level. Others have identified a head of desk, head of trading, or other senior manager overseeing a team responsible for making investment and executive decisions. The FCA notes that its market monitoring capabilities are best support by granular information on individuals or algorithms making specific investment or execution decisions and challenges firms to consider whether it is appropriate to assign primary responsibility to senior management within the firm who oversee investment or execution decisions but have limited practical involvement in those decisions at a transaction level.

• Some transaction reports have been submitted for spread trades which do not conform to the European Securities and Markets Authority (ESMA) transactions reporting guidelines as a complex trade, involving simultaneous buy and sell of 2 (or more) instruments quoted at a single price, typically a spread between the yield of the 2 instruments in basis points. The FCA reminds firms and market participants that it expects them to continue to apply ESMA guidelines and recommendations to the extent that they remain relevant.

• The FCA has identified inconsistencies in the notations reported by investment firms for the price and quantity fields. In cases other than where a specific price or quantity type is required for the instrument traded (for example, credit default swaps – price in basis points; equity – quantity in units), firms may determine the most appropriate notations to report. The FCA urges firms to follow market conventions when determining which notation to use.

• Some trading venues and systematic internalisers (SIs) are not successfully submitting data within the required timeframe under Article 2 of RTS 23. This impacts the ability of investment firms to submit transaction reports executed on trading venues or with SIs. As such, the FCA reminds trading venues and SIs that they should have adequate systems and controls in place to detect late reporting. And in such cases, they should promptly submit an instrument reference data errors and omissions notification to mrt@fca.org.uk.

The FCA notes that it may conduct further work on the areas covered in its Market Watch articles to ensure appropriate remedial actions are undertaken by firms. Firms should continue to submit errors and omissions notifications for any issues of which they become aware.