Why Regulators Keep Finding Your Reporting Breaks Before You Do?

Arjun Thirukonda
May 30
5 min read

It’s the compliance version of a horror film:

You think your reporting is solid—until the regulator sends you a list of breaks you didn’t even know existed.

Here’s the uncomfortable truth:

Regulators are now better at detecting your reporting errors than you are.

That’s not because they have better systems—it’s because they’ve changed the game. They’re no longer spot-checking. They’re using data science to reverse-engineer your breaks.

And if your QA and controls process still looks like “submit, reconcile, and fix,” you’re already behind.

The Breaks Most Firms Miss (Until It’s Too Late)

These are subtle. They don’t always throw errors. But regulators catch them. Here’s why:

Duplicate Trades
Caused by manual rebooking, system replays, or UTI logic flaws.
Regulator red flag: “Why do we see two versions of this trade with different timestamps?”
Timestamp Time Travel
Modifications or cancellations timestamped before the original trade.
Regulator red flag: “How did you cancel a trade that didn’t exist yet?”
Orphaned Executions
Executions with no linked order or parent leg (often due to booking mismatches).
Regulator red flag: “Where’s the upstream trail for this trade?”
Late or Lost Cancellations
Cancelled trades not reported, or sent post-settlement.
Regulator red flag: “Why is this cancellation showing up 2 days late?”

Surveillance and Reporting: It's Time to Blur the Line

One major reason breaks go undetected? Surveillance and regulatory reporting are treated as separate functions.

But the reality is, they’re just two views of the same trade flow.

If your surveillance team is seeing alerts for unlinked or out-of-sequence orders, that’s a signal your reporting might also be broken—and vice versa. Yet these insights often sit in silos.

Cross-Regime Reconciliation Is the New Control Frontier

Here’s where the so called "best practices" are headed: reconciling across reports—not just validating them in isolation.

Examples that reveal real breaks:

CAT vs. TRF (Trade Reporting Facility):
Does your CAT show a trade that’s missing in your TRF tape?
CAT vs. EBS (Electronic Blue Sheets):
A trade flagged in a surveillance alert may appear in your CAT feed—but not in your EBS response, especially if internal books and records can’t accurately link account or client information.

This often happens when allocations, client ownership, or manual overrides aren't properly reflected in the static data—exposing serious gaps in traceability.
MiFID vs. EMIR:
The same OTC derivative reported under both regimes should carry consistent data—counterparty, UTI, timestamps, notional amounts. But lifecycle mismatches (like valuation updates in EMIR but not in MiFID) are still common and often go unnoticed.

These mismatches don’t always throw errors in isolation—but cross-referencing is how regulators spot weak controls across regimes.

Why Internal Controls Still Miss What Regulators Catch?

Most firms genuinely aim to build strong controls around their regulatory reporting—focusing on completeness, accuracy, and timeliness. But despite that intent, critical breaks still slip through. Why?

Because the controls are often constrained by how data flows, who owns it, and how quickly things change. Here’s what that looks like in practice:

Controls Are Designed Around Systems—Not How Regulators Think

Field-level validations are usually robust:
- Mandatory fields are checked
- Format and schema validations pass
- Submissions go out on time
But the real questions often go untested:
- Do lifecycle events flow in the right sequence?
- Are cancellations or modifications logically linked to the original trades?
- Can we reconstruct a trade end-to-end if asked tomorrow?
Data Ownership Is Fragmented Across Functions

Even when controls exist, they often rely on different owners for static data, trade data, counterparty mapping, and booking logic.
- Surveillance may catch sequencing issues that never get escalated
- Ops might adjust allocations post-settlement, but reporting doesn’t reflect it
- A simple desk migration may change how UTIs are generated or timestamps are applied
Each function has controls—but no one’s checking how they interact across the full lifecycle.
There’s Little Ongoing Post-Submission Surveillance

Once the report is submitted, few firms revisit it regularly unless an issue is raised. That means:
- No process to re-pull and re-validate submitted data against what was actually booked
- Limited benchmarking of error trends (e.g., late cancellations, pairing failures)
- Minimal linkage testing between regimes (e.g., does this CAT trade match what we sent in EBS?)
By contrast, regulators routinely do all of this—using tools many firms don’t yet have internally.
Regulatory Impact Often Missed in Business or Tech Changes

New products, system upgrades, or booking model tweaks often go live without a full impact assessment on reporting. Even where change controls exist, the test plans may not include:
- Backward compatibility with previous submissions
- Cross-regime mapping (e.g., MiFID and EMIR consistency)
- Downstream impacts to reporting engines and validation rules
This leads to silent breaks—no system failure, but real inconsistencies regulators can spot instantly.

How to Catch Breaks Before the Regulator Does?

Here’s what high-performing firms are starting to do:

Validate the Full Lifecycle, Not Just Fields
Can you trace the trade from order to execution to modification to cancellation using your own data?
Example: Use lineage tools or even simple SQL joins to build flows that mirror what regulators reconstruct.
Cross-Check With External Truths
Match timestamps and key fields with your counterparties, clearing brokers, or trade repositories.
Example: Run weekly break reports across sources to spot mismatches before the regulator does.
Hunt for Missing Links
Look for trades with no orders. Cancellations with no originals. Gaps in the chain.
Example query: SELECT * FROM executions WHERE order_id IS NULL
Test for Logical Breaks
Timestamp logic is a quick win.
Example checks:
- WHERE cancel_time < trade_time
  GROUP BY trade_id HAVING COUNT(*) > 1
Match Across Regimes and Surveillance Data
- Compare CAT vs. surveillance alerts vs. TRF vs. EBS.
- Reconcile MiFID vs. EMIR vs. SFTR.
  
  Do they tell the same story for the same product?

Where to Start (Immediately) ?

You don’t need a full remediation program to get started—you just need to shift the lens from reporting as an output to reporting as a risk control.

Here’s where firms are seeing real value quickly:

Run a Lineage Review on 10 Trades
Pick 10 trades—reconstruct them from order through execution, allocation, modification, and cancellation.
Ask: Does every event link up? Can we explain this to a regulator without patching it manually?
Pick One Known Blind Spot—And Build a Control
Common candidates:
- Duplicate UTIs
- Orphaned executions
- Timestamp drift
  Build a simple rule or query to flag these daily or weekly. Small fixes compound quickly.
Compare One Pair of Regimes
Choose a crossover point—like a derivative reported under both MiFID and EMIR, or a trade that hits CAT and EBS.
Pull both records. Ask: Do they tell the same story? Would we catch it if they didn’t?
Sit Down With Your Surveillance Team
Identify trades that triggered alerts in the last 30 days.
Then check: Were they reported correctly? Was there an upstream issue that never made it into the reporting QA process?
Challenge Your Change Team
For your last product launch or booking model update, ask: Was regulatory reporting impact formally assessed? Were controls updated or tested end-to-end?

These aren’t audits—they’re small, surgical checks that can surface systemic issues early.

How RegEdge Can Help?

At RegEdge, we work with compliance and operations teams who don’t just want reporting to tick the box—they want it to stand up to scrutiny.

Here’s how we support clients:

End-to-End Diagnostic Reviews
We help firms trace real trades across reporting regimes, surveillance systems, and source data to uncover hidden breaks.
Control Enhancements & Custom Playbooks
We help you design practical controls and tools using the data and systems you already have.
Cross-Regime Reconciliation Frameworks
Whether it’s CAT vs. EBS, MiFID vs. EMIR, or surveillance vs. reporting, we help you connect the dots regulators are already looking at.
Change Impact Reviews
We work with your change and tech teams to ensure every new product, desk migration, or system upgrade considers reporting impact—before the break happens.

We bring a practitioner's lens, not a theoretical one. And we focus on what can be done now, not six months from now.