Transaction Reporting FAQs About MiFID II

September 21, 2017

The following MiFID II FAQs will attempt to clarify some of the key issues surrounding MiFID II transaction reporting.

This page is intended to be continually edited and updated as and when new questions are received. The date on which the page was last amended is included for ease of reference.

 

General

Legal Entity Identifier (LEI)

Approved Reporting Mechanism

General

What are the changes to the transaction reporting requirements under the MiFID II regime?

The new MiFID II transaction reporting requirements impose an obligation on firms carrying out transactions to report additional information and also to transaction report in relation to an increased number of financial instruments.

For a full description of the transaction reporting requirements, please refer to the Financial Conduct Authority  (FCA) or Central Bank of Ireland  (CBI) websites.

What are Pershing’s obligations for MiFID II transaction reporting?

The new transaction reporting regime places increased demands on financial institutions to report information on transactions that they have executed which must be completed no later than the close of T+1.

  • The scope of instruments to be reported to regulators includes those which are admitted to trade within the European Economic Area (EEA), on a regulated market (RM), multi-lateral trading facility (MTF) or an organised trading facility (OTF)
  • The scope of reportable transactions (to national competent authorities) is significantly extended in terms of:
    • Reception and transmission of orders
    • Reportable instruments
    • Corporate actions and transfers
    • Removal of exemptions for certain financial services firms
  • Reportable data is extended to provide greater transparency. This includes the investment and execution decision makers and algorithms and new identifiers for individuals and entities
  • Transaction reporting may now be submitted directly by an investment firm, through an Approved Reporting Mechanism (ARM), or by the trading venue through which the transaction was completed

What will Pershing be expecting from its clients in order to facilitate the provision of its transaction reporting service?

Plan and prepare: Get to grips with the detailed requirements set out in the delegated acts, RTS, ESMA guidance, FCA consultation papers and CBI Operational and Technical Arrangements. Understand your data and system requirements so that you can plan for any new builds, system upgrades, and interfaces with Pershing. Perform gap analysis to highlight which static data you may not have currently and are required to obtain from your clients. Establish which existing data points may require remediation. Develop testing, implementation plans and allocate resource.

Obtain your Legal Entity Identifier: From 3 January 2018, firms subject to MiFID II transaction reporting obligations will not be able to execute a trade and satisfy their MiFID II transaction reporting obligations, if they do not have an LEI. Pershing clients will therefore need to ensure they have applied for and been issued with an LEI. For further information on how to obtain your LEI, please visit the Global Legal Entity Identifier (GLEIF) website .

Gather information from your clients:

  • From individuals—obtain missing static data i.e. national IDs, dates of birth
  • From legal entities—ensure they obtain an LEI

The closing date for Pershing to receive client LEIs is no later than 1 October 2017.

Identify decision makers: Be able to identify individuals or algorithms, which make or execute the decisions for your firm and end client.

Are collectives reportable under MiFID II?

Secondary market transactions are reportable if the instrument is admitted to trading within the EEA, on a regulated market, MTF or OTF.

How will Pershing support joint accounts?

The new transaction reporting regime will require clients to identify all parties on the account. The appropriate identifier will be based on nationality, not the residence of the investor. Joint accounts will be identified using the usual identifiers, such as national IDs and dates of birth. This data will be stored against each individual investor on the account.

Legal Entity Identifier (LEI)

What is an LEI?

A Legal Entity Identifier (LEI) is a unique 20-digit code that identifies a distinct legal entity and replaces the Bank Identifier Code (BIC) or the FCA reference number (FRN). This will be used for identification purposes on the transaction report and to assist the regulatory authorities in monitoring and analysing threats to the stability of financial markets. It can also be utilised by counterparties internally for risk management purposes.

Pershing emphasises that all firms carrying out MiFID II activities must take steps to ensure that they either possess an LEI or have applied for one, well before MiFID II’s implementation on 3 January 2018. Clients will be required to identify legal entities with an LEI code and individuals with the appropriate identifier.

Why do I need an LEI?

From 3 January 2018, firms subject to MiFID II transaction reporting obligations will need to have an LEI to enable them to submit transaction reports and meet their regulatory obligation. Pershing clients will therefore need to ensure they have applied for and been issued with an LEI before this date. Firms will not be able to execute a trade on behalf of a client who is eligible for a Legal Entity Identifier (LEI) and does not have one. Pershing clients will therefore need to ensure their legal entity clients have applied for and been issued with an LEI before this date.

How do I obtain an LEI?

To obtain an LEI you must register with an authorised LEI issuer. They will carry out a validation check on the information provided and, assuming validation is successful, issue an LEI. A list of all LEI issuers can be found on the Global Legal Entity Identifier (GLEIF) website .

When should I apply for an LEI?

Firms should apply for an LEI as soon as possible as the deadline for Pershing to receive client LEIs is no later than 1 October 2017.

Do all LEIs require renewing?

GLEIF has recently amended its view on the subject of LEI renewals, since their initial press release in April 2017. GLEIF confirms that all legal entities are still required to obtain an LEI.

  1. Legal entities that only require an LEI for transaction reporting purposes, and are not an investment firm subject to the requirements of MiFIR, will not be required to renew their LEI on a yearly basis
  2. If a legal entity requires an LEI for transaction reporting and additional purposes (such as other regulatory reporting), the LEI will need to be renewed

It is the responsibility of either the client or legal entity to ensure the LEI is renewed, where applicable.

Do companies, trusts, self-invested personal pensions (SIPPs) and charities require an LEI?

Whereas individuals will be identified by their relevant national identifier (i.e. a national insurance number), trusts and charities will require an LEI. ESMAs guidance on SIPPs requires the individual beneficiary of the SIPP to be identified rather than the SIPP provider.

Approved Reporting Mechanism

What is an ARM?

An ARM is an Approved Reporting Mechanism. Under the transaction reporting obligations for MiFID II, firms have the option of reporting themselves or via an ARM. An ARM provides data collection, data validation and report creation, report submissions, exception reporting and feedback provisions.

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