MiFID II countdown: transaction reporting

MiFID II expands the current objective of transaction reporting from “the detection and investigation of potential market abuse” to “supporting ‘market integrity”.

An important component of achieving that objective is the ability to obtain sufficient and relevant information on market activity. This requirement is at the heart of the transaction reporting requirements expressed in MiFID II.

Many organisations are already subject to, and successfully deliver against, transaction reporting requirements. As one of these organisations, you might consider transaction reporting a trivial part of your MiFID II programme – this would be a mistake. 

As the intent of the regulation has broadened considerably, the new transaction reporting obligations significantly increase the volume of reportable data, the types of transactions and financial instruments, the number of execution venues and the range of reporting entities. In many cases, additional reporting, system changes or new operational processes will be needed. As with any system or process change, this will take some time for organisations to implement. 

The main things to be aware of are:
  • You’ll need to report quickly – you’ll need to report to the FCA no later than the close of the following working day.
  • The way in which you report may be different – you could report directly, through an Approved Reporting Mechanism (ARM), or via the trading venue through which a transaction was undertaken. 
  • The financial instruments you report on might be different – you could need to report on:
    • financial instruments which are admitted to trading or traded on a trading venue or for which a request for admission to trading has been made;
    • financial instruments where the underlying financial instrument is traded on a trading venue; and
    • financial instruments where the underlying index or basket of financial instruments is traded on a trading venue.
  • You will need to report substantially more data – for example, your reports will need to include:
    • details of the names and numbers of the financial instruments bought or sold;
    • quantity, dates and times of execution;
    • transaction prices;
    • a means to identify the clients on whose behalf the investment firm has executed that transaction;
    • instrument identifiers or product reference;
    • a means to identify the persons and the computer algorithms within the investment firm responsible for the investment decision and the execution of the transaction;
    • a means to identify the applicable waiver under which the trade has taken place; and
    • an indication of whether the transaction is a short sale.
Questions you should be asking yourself are:
  • Are you clear on which of your business lines are in scope for MiFID II transaction reporting? 
  • Are you clear on the new data to be reported? 
  • If so, do you collect the data in the first place? Are your systems geared to store and report this data?  Are your processes geared towards collecting the data and maintaining its integrity?
  • Are you clear on how you will execute the reporting in the timescales noted? 
  • Do you have the project and change management skills to make the changes to reporting?  How will you actually manage this project?
  • Have you left enough time for the various system changes?
Moore Stephens will launch its MiFID II Academy on 3 April 2017 and is ideally placed to assist all firms with the new application and notification process, as well as providing guidance and training on the specific requirements applicable to your firm.

For more information please contact us to discuss how this will affect your firm.

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