As we have already noted in a previous blog post, with the departure of the UK from the EU, it was expected that at some point the transaction reporting regimes of both jurisdictions would begin to diverge. Now it appears that this process is picking up steam, as the FCA and ESMA are consulting for changes to their respective MiFIR transaction reporting regime. The FCA is also consulting on changes to its MiFIR reporting regime, see our blog post here.
On the 3rd of October 2024 ESMA published a consultation paper proposing changes to the aforesaid transaction regime. MAP FinTech has already drafted its responses and intends to submit its views to ESMA’s consultation.
See below a non-exhaustive list of changes that ESMA is proposing.
Increase the total number of reportable data points by 48 new values and renaming existing data points
ESMA is proposing to include additional fields that in some cases aim to better align MiFIR with other reporting regimes such as EMIR Refit. To this end, ESMA is proposing to include data points such as:
- Option Premium,
- Receiver of Leg1/2,
- Floating Rate,
- Spreads,
- Effective date,
- Reference period of the floating rate,
- Term of floating rate.
These fields are fields EMIR reporting entities are familiar with, as ESMA is proposing to align (to the extent possible) MiFIR with EMIR reporting. MAP FinTech notes that not all 48 data points will be applicable to all trading scenarios. Further to the above ESMA is also proposing to change the definition and/or naming of some data points to align with the definitions/naming given under either SFTR or EMIR.
Identifiers linking all transactions in off-exchange trading
For any off-venue transaction ESMA is proposing the inclusion of a new field, the Transaction Identification Code (TIC). If ESMA’s proposals are accepted, all firms in a transmission chain will be required to report the same TIC code, liking all reports.
For Example assume a chain where the Client submits an order to Broker1 then Broker1 further submits the order to Broker2 then Broker2 to Broker3 and so on.
Each of the aforesaid Brokers if they have a MiFIR reporting obligation in the EU will be required to report the same TIC in their respective reports. ESMA proposes that the “Market Facing” firm should be the firm responsible for the TIC’s generation and dissemination further down in the transmission chain. Moreover ESMA is also proposing to standardise the TIC which will consist of elements such as Instrument Identifier, Date Time, LEI of generating entity.
New Identifiers for Distributed Ledger Technology – DLT securities and for securities whose underlying assets are crypto-assets
ESMA is proposing to adopt ISO 24165 Digital Token Identifier standard for DLT securities and underlying financial instruments to identify tokenised securities or similar. For a brief overview of the ISO refer to our earlier blog on ANNA-DSB’s adoption of DTIF codes for derivatives on crypto assets.
Should ESMA’s proposal be accepted firms that trade with DLT securities or securities whose underlying are crypto assets and under the assumption that the aforesaid securities are captured by the MiFIR reporting obligation, reporting firms will need to source the aforementioned ISO code.
Extending Art.4 of RTS 22 to include firms trading on Dealing on Own Account
Under the current RTS 22 regime, firms trading under trading capacity DEAL cannot make use of the reporting exemption afforded under Article 4 of RTS 22. ESMA proposes extend the applicability of Art.4 to such firms.
Reporting client/counterparty categories
ESMA proposes the addition of a new field that will capture the category of the clients/counterparty. The said field will be allowed 4 values – Retail Client, Elective Professional Client, Professional Client and Eligible Counterparty.
For every trade where the firm submits a report it will need to assign a category to its counterparty/client in accordance with the aforementioned.
Proposal to switch from XML to JSON
ESMA is requesting feedback on the issue of switching MiFIR reporting format from XML to JSON. As per the consultation paper ESMA is considering the gradual switch of various reporting regimes from an XML format to JSON. ESMA is asking respondents for their views on the proposed switch, including indications on costs, timelines of implementation and potential benefits.
The Consultation paper contains many more proposed amendments to MiFIR’s reporting requirements. ESMA is accepting feedback from market stakeholders till the 17th of January 2025. Once the consultation phase ends, ESMA will proceed to analyse the responses and adjust the proposals accordingly, then it will submit the amended RTS for approval by the EU commission.
How can MAP FinTech Assist
MiFIR Transaction Reporting is our service that allows clients to report their transactions in Financial Instruments as per the requirements of the Markets in Financial Instruments Regulation (MiFIR, Article 26) to the National Competent Authority (NCA), either directly or through an Approved Reporting Mechanism (ARM). Transaction data received on our Polaris Platform is processed, enhanced, validated and subsequently submitted in the format prescribed by each NCA.
Contact our team of experts for more information or any assistance you may require.