Transaction reporting under MiFIR was never designed to be a box-ticking exercise. Its purpose has always been to support the detection and investigation of market abuse, a function that depends not just on whether firms are reporting, but on whether what they report is complete, consistent, and capable of withstanding scrutiny.
According to ACA Group, as regulatory reliance on that data grows, so does the pressure on firms to demonstrate genuine control rather than assumed compliance.
ACA Group recently delved deeper into what it sees as the three lines in MiFIR regulatory reporting.
That pressure is sharpening precisely when frameworks are under strain. Regulatory reform, including the Financial Conduct Authority’s CP25/32 consultation on improving the UK transaction reporting regime, is reshaping scope and simplifying requirements in some areas. Yet the supervisory expectation has not shifted: firms must be able to evidence the accuracy and completeness of their reporting, not merely assert it. For many organisations, that is where the challenge begins.
Where the three lines start to blur
In theory, the three lines of defence model is well understood. The first line owns the creation and submission of transaction reports. The second line, typically the compliance function, provides oversight across regulatory obligations. The third line, whether internal audit or an independent external reviewer, delivers periodic assurance. In practice, transaction reporting regularly tests that structure to breaking point.
The core problem is that compliance teams are often drawn into first-line activity out of necessity: filling gaps in expertise, resourcing, or system capability. When that happens, the boundary between execution and oversight collapses. Second-line monitoring, where it exists at all, frequently draws on management information produced by the very teams it is meant to oversee. That limits the depth and independence of challenge, particularly where reporting logic is technical, assumptions are undocumented, or certain issues have simply become familiar over time.
Third-line assurance compounds the picture. Typically periodic and retrospective, internal audit or external review tends to offer point-in-time comfort rather than any real-time confidence that the framework is performing as intended.
Why regulatory change makes this worse
Periods of regulatory reform act as a stress test for governance arrangements. As firms focus on interpretation, implementation timelines, and technical readiness, weaknesses in segregation of duties and independent oversight are more likely to surface — and less likely to be resolved before they become embedded in the new regime.
Without deliberate challenge, firms risk carrying legacy control weaknesses into updated frameworks. The question is not whether an organisation can implement a regulatory change, but whether it can do so on a foundation of evidenced control. Where that foundation is absent, errors compound quietly. Known issues are accepted rather than challenged. Control effectiveness is inferred from familiarity rather than tested. Remediation addresses immediate symptoms rather than root causes in data, logic, or governance.
The consequences are not theoretical. Reporting frameworks can appear compliant on paper whilst containing hidden errors, inconsistent assumptions, or undocumented logic that only surfaces under regulatory scrutiny. By the time those issues are identified – often through formal supervisory engagement, remediation has become broader, more complex, and significantly more disruptive to business-as-usual operations.
Embedding independence into governance
Addressing these risks requires deliberate action rather than incremental adjustment. Firms should start by clarifying ownership across all three lines, ensuring that responsibility for delivery, oversight, and assurance is explicitly defined and not implicitly shared. Independent monitoring should be introduced, using sampling, reconciliations, and objective challenge that sits clearly outside day-to-day reporting operations.
Reporting outcomes should be tested against regulatory expectations, not just internal interpretations, to ensure data is genuinely capable of supporting effective market abuse surveillance. Issues, when they arise, should be investigated to root cause rather than resolved through tactical fixes that allow errors to re-emerge elsewhere. Equally important is integrating independent challenge into change programmes, so that new regulatory requirements are implemented on a foundation of proven control rather than assumption.
The value of an outside view
Many transaction reporting frameworks were built to meet the MiFID II deadline of 3 January 2018, designed under deadline pressure rather than through deliberate planning. Weaknesses embedded at that point can remain hidden for years, until exposed at precisely the most disruptive moment.
An independent perspective helps firms see their frameworks as regulators do. It enables objective assessment of completeness, accuracy, and control effectiveness, and highlights where assumptions, logic, or data dependencies have fallen behind changes in activity, systems, or personnel. That perspective is most valuable during periods of change, when historical assumptions are being tested and operating models are under pressure.
ACA supports firms across the transaction reporting lifecycle, from independent accuracy and completeness testing to governance enhancement, control framework design, and operating model optimisation. Its Regulatory Reporting Monitoring and Assurance solution, ARRMA, combines data-led analysis with specialist regulatory expertise to uncover hidden errors, identify root causes, and assess whether reporting frameworks are robust enough to support both regulatory change and business growth. Firms can access a free transaction reporting review to gain a clear, independent view of their current reporting risk.
In an environment where transaction reporting underpins market abuse surveillance, credibility matters. Firms that can demonstrate robust segregation of duties, independent assurance, and defensible reporting outcomes are better positioned to engage constructively with regulators, adapt to reform, and grow without accumulating unmanaged risk.
Read the full ACA Group post here.
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