Overview of MiFIR Transaction Reporting

Background
On 3 January 2018, a new Directive 2014/65/EC (“MiFID II”) and Regulation (EU) No 600/2014 (“MiFIR”) become effective, introducing significant changes to the transaction reporting (“MiFIR Transaction Reporting”) framework that was created in 2007 with the Markets in Financial Instrument Directive (“MiFID I”).

A new transaction reporting system has been implemented that will enable qualifying clients that have direct reporting obligations under the new Regulation to comply with the new MiFIR requirements.

Affected clients will need to provide additional information in order to continue trading through their accounts when the new reporting requirements become effective on 3 January 2018. The required information will be requested electronically to facilitate its collection.

Affected clients will be requested to provide this information promptly and no later than 30 December 2017.

Scope of MiFIR Transaction Reporting Obligations

MiFIR Transaction Reporting applies to European Economic Area (“EEA”) Investment Firms. As a client of an investment firm that uses the platform, you may be required to provide additional information to allow the proper transaction reports to be filed.

EEA Investment Firms are obliged to report complete and accurate details of transactions executed in financial instruments covered by MiFIR to the relevant National Competent Authority (“NCA”) no later than the close of the next day.

MiFIR has widened the scope of reportable financial instruments to cover those that are traded on EEA Regulated Exchanges, Multilateral Trading Facilities (“MTFs”) and Organised Trading Facilities (“OTFs”). In addition to transactions executed on EEA exchanges, MiFIR will capture Over The Counter (“OTC”) transactions and transactions of EEA listed financial instruments that are executed on non-EEA trading venues, e.g. a stock listed on the LSE traded on NYSE. (see financial instruments covered by MiFIR).

MiFIR Transaction Reporting Solutions for Clients that are EEA Investment Firms: Enriched and Delegated Transaction Reporting
Clients that have confirmed that they are an EEA Investment Firm subject to MiFIR transaction reporting obligations will be offered the option to delegate their reporting obligations.

Some transactions executed by these EEA Investment Firms will be reported by the company under “Enriched Reporting” obligations. For these trades the company will add details about the Investment Firm to its own reports, satisfying the reporting obligations of the Investment Firm. Other transactions will only be reported on behalf of Investment Firms on a delegated basis, as separate reports in addition to the company's own reports. Clients will only need to sign one agreement with the company to cover both types of reporting.

Information to Be Reported
The reporting fields have increased from 23 under the MiFID I regime to 65 under MIFIR. The new information requirements now include, among other items:

• Detailed identification of the buyer and the seller for each transaction. In particular, the Regulation requires the provision of Legal Entity Identifiers (“LEI”) for legal entities and National Identifiers for natural persons (based on their countries of citizenship).
• Identification of the Decision Maker for the buyer and the seller when a third-party exercises discretion:
  • A person other than the account holder on an individual or joint account, or a third-party entity.
  • A third-party other than the authorised traders on the account for an organisation account (e.g. a Financial Advisor trading for its clients’ subaccounts).

This information is not required where the account holder is self-trading or where authorised traders are trading for their own organisation.

• Identification of the person or algorithm that is responsible at the reporting firm for making the investment decision or for the execution of a transaction. This information is required for EEA Investment Firms that use our reporting services.
• For Commodity Derivatives Transactions, an indication as to whether such Commodity Derivatives Transactions reduce risk in an objectively measurable way in accordance with Article 57 of MiFID II; This is applicable to organisation accounts only when the holder is a non-financial entity.

The new information affects clients in different ways depending on whether the client is an EEA Investment Firm, or an organisation/person that is not an Investment Firm, and also depending on whether the financial instruments being traded are carried by us or another affiliate.

Implications for our clients that are not subject to MiFIR Transaction Reporting Obligations
In order to meet our own reporting obligations, we are obliged to identify and report our immediate client for each transaction executed. The reporting must contain the new client identifiers mandated by the Regulations.

Therefore, we will need to obtain and report a client identifier for:

• Direct clients that hold an account to trade financial instruments carried by our company;
• Clients that are EEA Investment Firms and utilise our reporting services;
• Clients that are subaccounts of an EEA Investment Firm that uses our trading platform and utilises our reporting services.

THIS INFORMATION IS GUIDANCE FOR CLEARED CLIENTS ONLY. THIS GUIDANCE DOES NOT APPLY TO EXECUTION ONLY ACCOUNTS.

NOTE: THE INFORMATION ABOVE IS NOT INTENDED TO BE A COMPREHENSIVE OR EXHAUSTIVE GUIDANCE AND IT IS NOT A DEFINITIVE INTERPRETATION OF THE REGULATION, BUT A SUMMARY OF MiFIR TRANSACTION REPORTING OBLIGATIONS.