During the recent Eurex Derivatives Forum in Frankfurt, Droit hosted an insightful panel discussion titled ‘Shifting Regulatory Decision Making Upstream: From Reactive Remediation to Preventative Controls’. The session brought together industry experts, including Nicholas Bruce, Head of Business Development, Regis-TR, Melanie Weber, Head of Derivatives Clearing Design, Eurex Clearing, and Nicklas Nilsson, Senior Regulatory Specialist, Swedbank, to challenge the status quo of siloed processes and downstream remediation. The discussion provided a strategic blueprint for the future of regulatory reporting, emphasizing the concept of “shifting left” to capture data quality issues pre-submission.
Here are 7 practical key takeaways and action areas for firms looking to optimize their regulatory frameworks.
1. Shift Controls Upstream (But Keep End-to-End Checks)
The core theme of the panel was the critical need to validate data completeness, accuracy, and regulatory scope before reporting. Catching inconsistencies at source is far easier and less costly than trying to remediate them downstream, where the data is spread out and fragmented. Shifting controls upstream proactively prevents rejects, reduces the need for back-reporting, and helps firms accurately determine scope to avoid both under- and over-reporting, both of which are regulatory breaches.
However, the panel was clear that upstream controls do not eliminate the need for downstream checks. Firms must maintain end-to-end reconciliations between their books and records and what is reported to the regulator. Instead of acting as the first line of defense, these downstream reconciliations serve to validate that the upstream controls are functioning correctly, ultimately making reconciliation less frequent, less deep, and easier to manage.
2. Make Data Quality a Continuous, Central Program
Firms must treat data quality as a standing priority, rather than a temporary project that pauses during regulatory lulls. Achieving high accuracy from the beginning leads to vastly improved metrics, allowing firms to monitor Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs) such as acceptance rates, timeliness, and pairing/matching rates.
Furthermore, building and documenting full data lineage is absolutely essential. When regulators or internal stakeholders ask where a specific data field came from or why it looks a certain way, “we don’t know” is not an acceptable answer. Firms need comprehensive data lineage to confidently explain the origin, transformation, and ownership of every single data element.
3. Rethink Where Reporting Sits in Your Architecture
Firms must critically review their data sourcing for regulatory reporting and ask themselves whether their reporting pulls from deeply transformed, fragmented systems, like a data warehouse at the very end of the chain, or if it sits closer to the trading systems. By moving closer to untransformed source data, firms can reduce inconsistencies and ensure the data is in its purest form.
To achieve this, organizations should design a comprehensive data-product landscape. This involves mapping how data flows end-to-end, defining clear data products (e.g., a Reg Reporting Trade Record), assigning clear owners to these products, and maintaining a centralized data catalog that describes sources and consumers.
4. Build for Change, Not for the Current Rule Set Only
The European Commission is currently pushing for regulatory simplification, but panellists warned that true simplification could take five years or more. Therefore, firms cannot afford to wait; they must build flexible, modular processes now. Because change is inherent – whether driven by regulators, internal management, or decommissioning systems – frameworks must be built that can easily adapt.
Firms should decouple their business logic (such as eligibility engines) from specific regulations to avoid creating one-off pipes that are difficult to reuse. Participants suggested using the current quieter regulatory window to reduce legacy technical debt and standardize control patterns across regimes like MiFID, EMIR, and SFTR.
5. Collaborate Across the Ecosystem
Accurate reporting is a collective industry challenge. Firms should engage with peers and counterparties during quieter periods to compare interpretations of key fields and scenarios, running bilateral reconciliations to align their views where possible.
Moreover, an audience member highlighted the importance of obtaining data directly from the source (as mentioned earlier). Instead of clearing members taking on the compliance and operational risk of recreating data fundamentally owned by Central Counterparties (CCPs) or venues, the industry should strive to ingest that data directly. Clarifying responsibilities for static and reference data will significantly reduce duplication and errors.
6. Prepare for Higher, Not Lower, Supervisory Expectations
Despite talks of simplification, regulatory scrutiny is only increasing. National Competent Authorities (NCAs) are becoming more targeted in their demands for data quality and transparency. Regulators now use advanced analytics and dashboards that allow them to cross-reference data across different regulations, easily comparing a firm’s MiFID reports against its EMIR reports to spot discrepancies.
With Phase 2 reconciliations generating even more data and scrutiny, the tolerance for errors is practically non-existent. Firms must leverage automated checks and anomaly monitoring to meet the ultimate regulatory expectation: report once, report right.
7. Reuse Reporting Data to Create Internal Value
Finally, high-quality regulatory data should not be siloed just for compliance purposes. No one inherently makes money from a regulatory reporting program. However, if firms architect their data improvements to be reusable across the business – serving risk, finance, client reporting, and internal management needs – they can extract genuine value.
Overall, the message on the panel was clear: the future of regulatory reporting is a shift from reactive remediation to proactive, preventative controls. By moving checks upstream, centralizing data quality, and building a flexible architecture that can adapt to change, firms can transform compliance from a pure cost into a strategic, value-driving asset that serves both regulatory demands and broader internal business needs.
