Trading Venue Operators and Systematic Internalisers: It is time for Reference Data Reporting
What is MiFIR Reference Data reporting?
According to the requirements of Article 27 of MiFIR, Trading Venues and Systematic Internalisers have to provide their supervising authorities with identifying reference data for the traded instruments in a standardised format. Reference data reporting is expected to start, along with the other MiFID/MiFIR and MAD/MAR reporting obligations, on 3rd of January 2018.
What does it mean and who is affected?
It means that operators of regulated markets, as well as MTFs, OTFs and Systematic Internalisers will be the ones required to report. They have to send information about the instruments traded -or allowed for trading- to the respective competent regulator prior to any transaction with the given financial instrument. Also, the data has to be updated if there are any changes to the initially reported details. The National Competent Authorities (NCAs) will subsequently transfer the collected data to ESMA ensuring sustainable, harmonised and up-to-date databases.
How it will work?
As per MiFIR and MAR requirements, the reporting flow can be summarised as follows:
- Trading Venues and Systematic Internalisers will provide reference data to their NCAs, or to ESMA directly;
- Non-delegating NCAs provide that information directly to ESMA;
- ESMA publishes the information on its website for public consumption and provides it to NCAs as downloadable files.
The pictures below represent the reporting process in two cases – via the NCAs or directly to ESMA.
The NCAs are allowed to delegate to ESMA (based on a Delegation Agreement) and collect data directly from Trading Venues and Systematic Internalisers on their behalf. In such cases, the dataflow will look like this:
Given the significant amount of data to be collected and in an attempt to make the process as smooth as possible, and based on the principles set in RTS 23 (and the Annexes), on 26th of October 2016 ESMA issued detailed Reporting instructions for uploading of data to the Financial Instruments Reference Data System (“FIRDS”) which System is developed and operated by ESMA to serve both, MiFIR and MAR purposes. The document ESMA/2016/1522 specifies the exchange of Reference Data Information between NCAS, Trading Venues, Systematic Internalisers and the FIRDS. The instructions also define the ‘need-to-knows’ for Trading Venues, Systematic Internalisers and Competent Authorities to report instruments’ reference data.
What data must be reported?
An estimated 15 million different financial instruments are traded across EU. For the regulators it is crucial to create a common and transparent database using the principles of standardisation, harmonisation and consistency. With that in mind, it is not surprising that the European Commission considers the ISIN as the most appropriate single identifier for the purposes of market surveillance in the context of MiFID II.
There is set of 48 reference data fields listed in the Table 3 of the Annex to RTS 23, which can be divided in several main groups:
- General Fields (ISIN, name, classification, etc.)
- Issuer or operator´s identifier (LEI)
- Venue related fields (MIC, instrument´s short name as per ISO 18774, etc.)
- Notional related fields
- Instrument related fields (particular points are separated by asset class and type)
All details should be provided by the Trading Venues and Systematic Internalisers as per the format standards specified in the Annex. The report has to be in electronic, machine-readable form and in a common XML template compliant with ISO 20022.
Files must be sent to the competent authority by 21:00 CET on each day when the trading venue or Systematic Internaliser is open for trading with the reference data for all financial instruments that are admitted to trading or that are traded, including where orders or quotes are placed through their system, before 18:00 CET on that day. If trade, order or trade admittance emerges after 18:00 CET, the respective reference data of the financial instrument concerned shall be provided by 21:00 CET on the next working day.
As many other reporting tasks, the Reference Data report depends on two main substances:
- Entry data
- Reliable system for data processing
The Reference data report is standardised to the maximum possible degree and this is definitely not a surprise, given the information recipients – ESMA and NCAs. This tiny, but essential detail makes the selection of appropriate service provider very important. The connecting vendor must be capable to extract data from numerous different sources, to convert it in the required format, to create, fill and verify templates, to submit the unified reports on time and also to receive and process related information from the NCAs or ESMA to the Trading Venues and Systematic Internalises.
Or, in few words – the vendor has to ensure proper operation of the entire data flow in a “There and back again” mode.