ESMA PROPOSES AMENDMENTS TO MIFIR TRANSACTIONS AND REFERENCE DATA REPORTING REGIMES
March 30, 2021
What is happening?
- ESMA has published Final Report on its recommendation to update MiFIR transaction and reference data reporting obligations
- The European Commission to review proposals
- European Parliament to ratify then implementation timescale to begin
- Estimated timescales to go live – 3 years.
What are the high impact proposals?
- Update to TOTV definition to include products currently listed on Sis (79)
- The definition of index to be brought in line with benchmarking regulation (100)
- INTC to be replaced with a unique code per grouped order (185)
- Additional data required to identify clients (188)
- The removal of the short sale indicator (215)
- Buyback transactions to become in scope for reporting (235)
CN summary of requirements;
| Reference | Section | ESMA Recommendation | Cross Reference |
| 7 | 4.1 – AIFMD and UCITS firms | AIFMs and UCITS management companies are not investment firms authorised under MiFID, are not subject to the requirement to report transactions even in the cases where they perform MiFID services | 22 |
| 8 | 4.1 – AIFMD and UCITS firms | UCITS management companies and AIFMs providing one or more MiFID services to third parties should be subject to transaction reporting in accordance with Article 26 of MiFIR. | 24 |
| 9 | 4.1 – AIFMD and UCITS firms | ESMA would like to clarify that the proposed change should only affect AIFM/UCITS management companies when providing one or more MiFID services, it will not cover transactions stemming from other activities conducted by the AIFM/UCITS firms. Trading venues should no longer be obliged to report the same transactions. | 32 |
| 10 | 4.1 – AIFMD and UCITS firms | ESMA understands that it may happen that AIFMs and UCITS could provide by mistake transaction reports of services which are not considered MiFID-related. Such case would qualify as overreporting as the specific transactions are not relevant for market abuse surveillance. However, ESMA would like to clarify that the monitoring of this specific case of overreporting will not be considered as a supervisory priority from the start of the application of this new requirement. | 34 |
| 18 | 4.2 – Reference to ‘members/participants/users’ of Trading Venues | ESMA have proposed some amendments to the terminology used for article 25/26 to describe “users” of a trading venue – needed to provide additional clarity. | 43/49 |
| 24 | 4.3 – Branches of EEA Entities | ESMA’s intention was and is that firms report transactions, in which a branch is involved, to the home NCA only. The home NCA will make sure the host NCA will also receive the transaction report. | 56 |
| 29 | 4.4 – Arrangements for sharing reports | ESMA proposed that Article 26(1) should be accompanied with a more general reference to the possibility for NCAs to share the information received under this article ‘where a request has been made’ and/or ‘the NCA has agreed to share the information’. | 59 |
| 31 | 4.4 – Arrangements for sharing reports | With respect to the considerations made on the possibility of direct reporting to ESMA. , this was identified as one of the broad themes raised by stakeholders in response to several questions in the consultation.
As evidenced by the experience with the reference data reporting under MiFIR Article 27, ESMA acknowledges that this centralisation could, among others, increase the efficiency of sharing among various NCAs the relevant information needed for the purpose of carrying out their duties under MiFIR and reduce duplication of reporting processes. ESMA recommends the EC to still consider this possibility as a long-term objective. |
66 |
| 36 | 5 – uTOTV: Scope of instruments subject to reporting obligations (Articles 26(2) and 27(1)) | The concept of ‘traded on a trading venue’ seems to be self explanatory for instruments that are centrally issued and that are fully standardised, such as shares and bonds as well as exchange traded derivatives, it is less straightforward for OTC derivatives.
Given that bilateral derivatives are not standardised, each time two parties enter into a contract, such contract might be slightly different from the otherwise similar one entered into by two other counterparties. For this reason, it becomes challenging to determine when a bilateral derivative that was traded OTC is different or is the same as another one traded on a trading venue. |
72 |
| 37 | 5 – uTOTV: Scope of instruments subject to reporting obligations (Articles 26(2) and 27(1)) | In May 2017, ESMA issued an opinion clarifying that only OTC derivatives sharing the same reference data details (same values as the ones reported to the FIRDS except for the venue related fields (5-11)) as the derivatives traded on a trading venue should be considered ToTV. Hence, OTC-derivatives not sharing the same reference data as instruments reported to FIRDS, including the same ISIN, would not be considered ToTV. | 73 |
| 38 | 5 – uTOTV: Scope of instruments subject to reporting obligations (Articles 26(2) and 27(1)) | An initial assessment of the ToTV concept has already been made within the context of the Final Report on the MiFIR review of the non-equity transparency regime; a second consultation on the proposals made therein is not necessary | 74 |
| 39 | 5 – uTOTV: Scope of instruments subject to reporting obligations (Articles 26(2) and 27(1)) | ESMA considers that option 1 illustrated in the CP should be retained.
90. Under this approach, SIs would be subject to reference data and transaction reporting (Articles 26 and 27 of MiFIR) and should make transparent quotes and transactions they execute (Articles 18 and 21 of MiFIR) in derivatives belonging to the same sub-asset class of derivatives for which they are SIs. |
89 |
| 40 | 5 – uTOTV: Scope of instruments subject to reporting obligations (Articles 26(2) and 27(1)) | Derivative instruments that are exclusively traded through SI systems would have to be reported under Articles 26 and 27 of MiFIR and made transparent.
This type of off-venue transactions in derivatives instruments would need to be reported also including for instruments where the underlying is not traded on a trading venue. |
79 |
| 43 | 5 – uTOTV: Scope of instruments subject to reporting obligations (Articles 26(2) and 27(1)) | Any transaction executed through an SIs in a derivative belonging to the same sub asset class as derivatives for which they are SIs would need to be reported; | 92 |
| 44 | 5 – uTOTV: Scope of instruments subject to reporting obligations (Articles 26(2) and 27(1)) | Several implementation options can be envisaged to facilitate compliance with the new obligation:
a) An expansion of the ESMA SI register ; |
96 |
| 51 | 5.3 – Transaction reporting indices under Article 26(2)(c) | The current definition of ‘index’ provided under Article 3(1) of the BMR is more precise and appropriate in order to define the scope of transaction reporting. Among the indices covered by Article 3(1) of the BMR, ESMA considers that only the ones that are also ‘benchmarks’ as defined in Article 3(3) of the BMR should be covered. | 100 |
| 58 | 5.4.1 – Instrument listed on a MTF | ESMA recommended amending the text of Article 27(1) of MiFIR to reflect the wording used in Article 4 of MAR. Such wording would be consistent with the text used in the related RTS 23 (fields 8, 9, 10 and 11 of RTS 23), where the fields related to ‘admission to trading’ generally refer to ‘trading venues’ and not only Regulated Markets.
‘With regard to financial instruments admitted to trading or traded on a trading venue, trading venues shall provide competent authorities with identifying reference data for the purposes of transaction reporting under Article 26.’ |
125 / 126 |
| 63 | 5.4.2 – Approval of trading on an MTF or OTF | ESMA proposed that the text of the amended Article 27 should read as follows: ‘With regard to financial instruments admitted to trading or traded on a trading venue (see above, 5.4.1.) or where the issuer has approved trading of the issued instrument, trading venues shall provide competent authorities with identifying reference data for the purposes of transaction reporting under Article 26.’ |
132 |
| 68 | 5.4.3 – Request for admission to trading | ‘With regard to financial instruments admitted to trading or traded on a trading venue (see above, section 5.4.1) or where the issuer has approved trading of the issued instrument (see above, section 5.4.2) or where a request for admission to trading on a trading venue has been made, trading venues shall provide competent authorities with identifying reference data for the purposes of transaction reporting under Article 26. |
141 |
| 87 | 6 – Details to be reported (Article 26(3)): Trading Venue Transaction Identification; chain of transactions | Include a new code, which enables NCAs to identify the market legs that pertain to the client legs when grouping orders. | 173 |
| 88 | 6 – Details to be reported (Article 26(3)): Trading Venue Transaction Identification; chain of transactions | The current value ‘INTC’ be removed and replaced by a code, internal to the investment firm but obviously unique for the market-side reports and the client-side reports | 185 |
| 93 | 7 – Details to be reported: the identifiers to be used for parties (Articles 26(3) and 26(6)) | Further to Article 24 of MiFID II, clients are to be categorised in function of their financial literacy
Annex II of MiFID II sets out the criteria and the categories for clients: |
188 |
| 94 | 7 – Details to be reported: the identifiers to be used for parties (Articles 26(3) and 26(6)) | ESMA proposed that the text of the amended Article 26(6) should read as follows:
Clients shall be categorised according to Article 24 of Directive 2014/65/EU. |
193 |
| 105 | 8.2 – Short sale indicator | NCAs are not in a position to utilise SSI information in their mandates of supervision and market surveillance. | 215 |
| 106 | 8.2 – Short sale indicator | ESMA proposed the removal of this information from the transaction reporting | 216 |
| 118 | 9.2 – Buy backs programs | MAR requires issuers to report transactions in buyback programs on their financial instruments | 232 |
| 119 | 9.2 – Buy backs programs | ESMA proposed an additional requirement to include a designation to identify transactions in buy-back programs that have been carried out by investment firms on behalf of an issuer in the transaction report in accordance with Article 26 of MiFIR. | 235 |
| 133 | 12 – Interaction with the reporting obligations under EMIR | ESMA recommended removing the following paragraph from Article 26(7) of MiFIR:
‘Where transactions have been reported to a trade repository in accordance with Article the solution envisaged in Article 26(7) of MiFIR is not optimal because in practice there will never be a case where a given report under EMIR will contain all information that is necessary for transaction reporting purposes. |
268 |
| 134 | 12 – Interaction with the reporting obligations under EMIR | Certain fundamental differences in the two reporting regimes are due to the different purposes of reporting and should be taken into account to avoid compromising the financial stability and market integrity objectives of the reporting obligations. For example, the information related to lifecycle events concerning e.g. the clearing or compression activity of an investment firm is only relevant for systemic risk detection and is not needed for the purpose of detecting abusive behaviors.
For market abuse monitoring it is not necessary for NCAs to be able to link the subsequent lifecycle events to the original transaction since NCAs are primarily interested in the change of position at the time of the execution. Receiving information on such post-trade activities would make it more difficult for the NCAs to conduct their market surveillance activities. |
275 |
| 147 | 12.3.2 – Frequency and date of the reports | ESMA confirms that it is not envisaged to introduce intraday reporting. | 302 |
ESMA proposes amendments to MiFIR transactions and reference data reporting regimes (europa.eu)
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