In the current regulatory landscape, there is a clear and emerging trend toward near real-time reporting, moving beyond the current T+1 standard. As regulators require more timely data to monitor market activity and prevent systemic risk, firms must adapt to providing more data-driven insights in as close to real-time as possible. Implementing such a change can present significant operational and technical challenges for firms.
What is Driving the Shift Toward Real-Time Reporting?
In recent years, regulators have become increasingly focused on the accuracy and quality of the data being submitted by firms. There are several reasons for this, including high-profile market volatility events that have highlighted the need for faster insights into potential systemic risk. The previous T+2 reporting method demonstrated that even a short delay can impede the ability of regulators to react to emerging risks, and the current T+1 system also has its limitations. At the same time, technological advancements in recent years have made real-time reporting more feasible. The widespread adoption of cloud computing and Application Programming Interfaces (APIs) enables instantaneous communication between systems that can be scaled to process vast amounts of data instantly. This combination eliminates many of the challenges associated with legacy systems, paving the way for real-time reporting in regulatory compliance.
What are the Core Operational and Technical Challenges of Real-Time Reporting?
The move towards a real-time reporting framework may be a technical possibility, but it will prove operationally challenging for firms. There are several key issues that firms need to consider:
- Sourcing and validating quality data: Data from multiple sources must be aggregated and validated against complex rules in real-time, which can be challenging to automate depending on the data sources.
- System performance and latency issues: A real-time framework requires optimum latency across all components for consistent, high-speed performance.
- Infrastructure resilience and legacy systems: The tolerance for downtime is reduced to near zero in real-time systems with no end-of-day capacity for recovery time, which is often required by legacy systems for stability
- Real-time error and correction processing: Unlike T+1 models that provide time to address and remedy errors, real-time frameworks demand an immediate and automated process to handle reporting errors.
How are Current Regulatory Regimes Preparing for Real-Time Reporting?
The Securities Financing Transactions Regulation (SFTR) was a critical step toward making automated processing a requirement. By enforcing a strict T+1 deadline, firms were required to implement a high degree of automation to move away from the traditional end-of-day processes and toward daily pipelines. This served as an important foundational model for the potential move toward real-time reporting frameworks. This trend is evident in global regimes such as the US under the Dodd-Frank Act. The term “as soon as technologically practicable” (ASATP) was introduced as a standard requirement for certain swaps, and for the first time, directly linked reporting speed to the technological capabilities of firms. In European markets, the T+1 standards of the European Market Infrastructure Regulation (EMIR) and the Markets in Financial Instruments Regulation (MiFIR) set the current baseline. The EMIR Refit in 2024 mandated the use of ISO 20022, which creates a universal, machine-readable language that will be an essential requirement for the shift to real-time reporting systems. The regulatory shift toward real-time reporting should be viewed not only as a compliance burden but as a strategic opportunity for firms. This opportunity will require firms to modernise their core systems by overhauling outdated legacy infrastructure, investing in system resilience and implementing fully automated control frameworks. By undertaking this modernisation now, firms can build highly resilient systems capable of continuous, high-volume processing to prepare to meet future regulatory requirements. Legacy infrastructure slowing down your reporting capabilities?
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