ESMA Post-Refit Data Quality Report 2024 (EMIR-SFTR-MiFIR) Improvements and Ongoing Challenges for 2025
The European Securities and Markets Authority (ESMA) recently published its fifth annual report on the Quality and Use of Data for 2024 (the Report), reflecting significant progress in the regulatory community’s approach to data management and utilization. This comprehensive assessment is pivotal as it outlines both the advancements made in the quality of regulatory data and the persistent challenges that financial institutions continue to face in meeting data standards.
A notable development in this year’s Report is ESMA’s decision to broaden the scope of its analysis. For the first time, the review explicitly incorporates evaluations of the European Single Electronic Format (ESEF) for Annual Report filings and data related to short-selling activities. The inclusion of these datasets is a response to evolving regulatory priorities, aiming to enhance market transparency and strengthen investor protection. The move underscores ESMA’s commitment to broadening its oversight capabilities and reflects the regulator’s recognition that high-quality, comprehensive data forms the foundation of effective market supervision.
Central to the report is the reinforced emphasis on the intrinsic connection between data quality and regulatory effectiveness. The regulator underscores that data of poor quality significantly undermines the effectiveness of surveillance and market oversight, potentially leading to gaps in identifying systemic risks or fraudulent activities. Consequently, ESMA calls for market participants and reporting entities to adopt proactive, rather than reactive, approaches toward data governance, investing in processes and technologies that ensure accuracy, timeliness, and completeness.
EMIR REFIT: Year One Evaluation
The implementation of the EMIR REFIT marked a significant evolution in European derivatives reporting, particularly with the transition to the ISO 20022 XML format. This transition, mandated to enhance standardization and reporting clarity, initially resulted in operational challenges. Early reporting indicated relatively high file-level rejection rates—around 0.23% during the initial rollout. However, consistent efforts by firms, supported by technological upgrades and strengthened internal controls, significantly reduced these rates, achieving an impressively low rejection rate of 0.0047% by February 2025.
At a more granular level, field-level rejections experienced a similar trajectory. Initially, as firms adjusted to the complexity and precise data requirements inherent in the EMIR REFIT standards, field-level rejections stood at approximately 20%. These were primarily due to incorrect or incomplete data submissions, highlighting gaps in firms’ internal processes and validation systems. Over the year, intensive remedial actions—driven by regulatory feedback, enhanced systems, and increased diligence—led to these rejections decreasing substantially to between 1% and 2.5%.
Data Quality Indicators (DQIs) Performance
EMIR REFIT’s first year also provided valuable insights through key Data Quality Indicators (DQIs), enabling ESMA to benchmark progress on trade and position-level reporting accuracy. At the outset, trade-level discrepancies were notably high, at 33.91%, reflecting significant challenges in accurately pairing and matching counterparty reports. This was a clear indication of the industry’s initial struggle with the enhanced data precision demanded by the new rules. However, a focused regulatory emphasis on accurate matching and reconciliation of trade data substantially improved performance, bringing trade-level discrepancies down to 20.5% within the first year.
Similarly, position-level reporting initially demonstrated even greater difficulties, with discrepancies at a worrying 55.16%. This high rate primarily indicated substantial gaps in firms’ abilities to provide consistent and precise position reporting across counterparties. Through sustained efforts—including better industry collaboration, improved internal data governance frameworks, and regulatory guidance—these discrepancies significantly decreased to 22.17%. While still above ideal thresholds, the improvement clearly indicates a positive trajectory and demonstrates the industry’s increasing proficiency in managing complex data requirements.
Despite these notable improvements, specific persistent issues were identified by ESMA, particularly regarding valuations. Missing valuation data remained an ongoing challenge, standing at 12.63% by the end of the evaluation period. Additionally, the timely submission of valuation updates also posed difficulties, with 16.19% of reported valuations being outdated. These statistics highlight a critical area for further focus, emphasizing the necessity for firms to reinforce data submission controls and enhance internal valuation processes to ensure both completeness and accuracy in regulatory reporting.
SFTR and MiFIR Data Quality Developments
The Securities Financing Transactions Regulation (SFTR) reporting continued to face significant challenges, particularly regarding data matching accuracy. ESMA’s report highlights persistent concerns over the mismatch rates, which consistently exceeded acceptable thresholds. Trade-level mismatches across counterparties remained notably high, averaging around 35%, substantially above ESMA’s targeted benchmark of 5%. This discrepancy underscores the complexity involved in matching data across reporting entities and highlights the need for greater alignment and standardization among market participants.
Position-level mismatches, although less severe than trade-level errors, also demonstrated room for improvement, stabilizing around 10%. This indicates ongoing inconsistencies in how positions are recorded and reported, further emphasizing the necessity for clearer guidelines and stronger data validation processes within firms. Despite these mismatch challenges, there was noteworthy progress in certain areas; for instance, the percentage of reports missing market valuations improved significantly, decreasing to 8.5%. This improvement suggests that efforts made by market participants to address previously identified gaps are beginning to yield positive results.
Turning to the Markets in Financial Instruments Regulation (MiFIR), ESMA reported substantial enhancements in both data coverage and quality. The volume of publicly reported trades through Approved Publication Arrangements (APAs) surged dramatically, nearly doubling from 237 million in 2023 to approximately 460 million in 2024. This growth reflects increased market transparency and heightened compliance by investment firms and trading venues. Moreover, Approved Reporting Mechanisms (ARMs) accounted for the majority (52.45%) of around 7.7 billion total transactions reported, indicating their central role in ensuring consistent, timely, and accurate data submissions.
Despite this progress, ESMA identified areas needing attention. While overall rejection rates for MiFIR submissions remained low, specific validation scenarios experienced occasional spikes. These spikes, linked to more complex reporting fields or newly implemented validation rules, illustrate ongoing adaptation challenges faced by reporting entities.
Progress and Ongoing Challenges
A key strategic initiative highlighted by ESMA in its 2024 report is Project SHARE, which underscores a significant shift toward greater collaboration among European regulators. Project SHARE is designed to foster improved data exchange and supervisory convergence between ESMA and National Competent Authorities (NCAs). By facilitating a seamless flow of information, the initiative aims to reduce discrepancies and enhance the consistency of regulatory oversight across Europe. Such collaboration is crucial in addressing the fragmented nature of data collection and reporting practices.
The Report highlights substantial advancements across multiple regulatory reporting regimes. Under EMIR REFIT, the successful shift to the ISO 20022 XML standard has significantly streamlined reporting processes, evidenced by a dramatic decline in both file-level and field-level rejections. This demonstrates clear progress in both the industry’s capability to adapt to regulatory changes and ESMA’s effectiveness in guiding firms towards compliance. Similarly, enhancements under MiFIR have resulted in increased transparency, with significant growth in the volume of publicly reported transactions and a stable management of transaction rejection rates.
However, ESMA emphasizes that significant work remains. Persistent issues, particularly within EMIR, are evident in the accuracy of valuation reporting. The report underscores that missing and outdated valuation data continue to be problematic, potentially compromising the reliability of regulatory analyses and systemic risk assessments. Likewise, SFTR data reporting continues to experience elevated trade-level mismatch rates, far exceeding the regulatory target. This persistent discrepancy highlights the need for firms to refine reconciliation processes and internal controls further.
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