What Kind of Transaction Reporting Do European Financial Firms Need to Do?

/What Kind of Transaction Reporting Do European Financial Firms Need to Do?

This content was originally published in the Traction Fintech blog. It is republished in full with permission from the author.

The number of different types of regulatory reporting for financial instruments increased with the introduction of MiFID II on 3 January 2018.

The regimes have varying reporting requirements and affect entities in different ways. Which ones apply to you?

1. MIFIR Transaction Reporting

MiFIR transaction reporting requires the details of qualifying transactions to be reported to a National Competent Authority (“NCA”) or Approved Reporting Mechanism (“ARM”) within one day (T+1) of the transaction. It applies to transactions in financial instruments that are:

  • admitted to trading or traded on a trading venue;
  • whose underlying is a financial instrument admitted to trading or traded on a trading venue; or
  • is an index of a basket comprised of such financial instruments,
  • regardless of whether these transactions are traded outside the trading venue.

Transaction reports are required to include the identity of both the client and the trader or algorithm responsible for the investment decision and/or execution. Keep an eye out for a separate article which we will release shortly, explaining the requirements for executing agents.

Who has to report?

Investment Firms as defined in Article 4(1)(1) of MiFID II  and EEA branches of third country Investment Firms.

2. MiFID Commodity Position Reporting

Commodity derivatives listed on EEA trading venues (a Regulated Market (“RM”), Multilateral Trading Facility (“MTF”) or Organised Trading Facility (“OTF”)) and OTC derivative contracts that are deemed to be ‘economically equivalent’ to the venue listed instruments.

Who has to report?

MiFID Investment Firms and EEA branches of third country Investment Firms who trade the relevant commodity derivatives. 

3. EMIR Reporting

EMIR includes an obligation to report details of all derivatives to trade repositories.

Who has to report?

All counterparties to derivative transactions including both financial and non-financial counterparties but not natural persons.

4. MIFIR Trade Publication

Also referred to as ‘trade reporting’, trade publication relates to the near real-time public dissemination of trade data through an Approved Publication Arrangement (“APA”) required for transactions in in EEA venue-listed instruments. These reports don’t require as much information as a transaction report – the focus is on execution data relating to volume and price – and only one report is required for the trade rather than by all firms involved in the transaction as with transaction reporting.

Who has to report?

Either the trading venue or where a venue isn’t involved then the publication requirement falls to the Systematic Internaliser (“SI”). SIs are investment firms which on an organised, frequent, systematic and substantial basis, deal on their own account when executing client orders outside a regulated market (“RM”), multilateral trading facility (“MTF”) or organised trading facility (“OTF”) (together, “Trading Venues”) without operating a multilateral system.

If no SI is involved in the transaction then the obligation falls upon an Investment Firm.

5. MiFIR Reference Data Reporting

MiFIR requires the submission of instrument reference data from certain firms. This will enable regulators to compile a list (ESMA’s Financial Instrument Reference Data System or ‘FIRDS’) of instruments that are traded on venue or by a SI.  Keep an eye out for our upcoming article with further information on SIs.

Who has to report?

The reporting of reference data is an obligation that falls upon firms operating trading venues and firms acting as a SI.

Quinn Perrott

Quinn has an extensive background in IT starting as the IT Manager for City Index. Quinn then went on to be co-founder and General Manager of AxiTrader, one of Australia’s largest Margin FX providers.

TRAction Fintech can help you to understand and streamline your reporting obligations under and can simplify compliance by reporting on your behalf. Please contact us for further information.

2018-09-18T15:51:09+00:00September 18th, 2018|