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Dear CEO | Release Date: 31st May 2022

To read a longer summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Short Summary

The FCA has issued a supervisory strategy letter to CEOs of firms providing data reporting services, specifically approved reporting mechanisms (ARMs) and approved publication arrangements (APAs). These entities, collectively known as Data Reporting Services Providers (DRSPs), are critical for ensuring market transparency and integrity by accurately reporting transaction details and publishing post-trade transparency reports on behalf of investment firms.

The FCA supervises DRSPs under a robust regulatory framework, which includes the Data Reporting Services Regulations 2017, UK MiFIR, and related technical standards, all aimed at upholding high standards of market conduct.

Key risks identified by the FCA include the potential market concentration of DRSPs, which might limit competition and reduce service quality. Furthermore, there is concern about the adequacy of systems and controls to prevent erroneous reporting, which is vital for maintaining market integrity. Operational resilience is also highlighted as a critical area, especially considering the potential consequences of disruptions in data reporting services on market stability.

The FCA expects DRSPs to rigorously manage these risks by maintaining high-quality services, ensuring their systems are capable of accurately handling data, and having robust contingency plans in place. Firms must demonstrate compliance with the regulatory framework and actively engage in addressing the FCA’s concerns through transparent and cooperative interactions.

Key Take-aways for Affected Readers:

DRSP firms must prioritise enhancing their operational controls and systems to ensure accurate and reliable reporting services. They should evaluate their service quality and competitiveness regularly, ensure transparency in their operations, and maintain an open line of communication with the FCA. Firms are expected to actively manage concentration risks and ensure their business continuity plans are robust enough to handle potential disruptions effectively.

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