The revised directive for markets in financial instruments (Markets in Financial Instruments Directive - MiFID II) and the accompanying regulation (Markets in Financial Instruments Regulation - MiFIR) have defined the rules for the delivery of services in the area of securities for a variety of financial instruments in regulated, multilateral and organized trading venues.
The directive and the accompanying regulation extended the transparency guidelines under MiFID I and have been applicable since 3 January 2018. They aim to stabilise and realign the financial market infrastructure. Significant aspects in relation to these measures are the introduction of a new trading-venue category, the so-called “Organised Trading Facility” (OTF), a trading venue obligation for certain financial instruments, and a clearing obligation for derivatives traded on regulated markets.
Pursuant to Article 26 MiFIR, investment firms and trading venue operators are obliged to report daily their transactions in financial instruments
The scope of this reporting has been defined by the European Securities and Markets Authority (ESMA) in the form of technical standards (ESMA/2015/1464, RTS 22) as well as Level III guidelines (ESMA/2016/1452). This report must be filed with the respective national competent authority (NCA) either directly by the trading venue or via a so-called Approved Reporting Mechanism (ARM) by the end of the business day following the transaction day (t+1). The technical report format is xml, based on the ISO20022 standard.
Article 58 of MiFID II sets the provisions on the reporting of positions in commodity derivatives by investment firms trading commodity derivatives, emission allowances or derivatives thereof, as well as by operators of trading venues on which these financial instruments are traded. The daily reporting must include a complete breakdown of their positions as well as those of their clients and the clients of those clients down to the end client. The positions will be reported to the trading venue in the case of on-venue traded commodities and to the relevant NCA in the case of off-venue traded commodities.
Additionally, there are new rules for the transparency of costs under MiFID II. Investment firms must provide a total overview of all the expected costs to the client before providing any service. All costs are defined as the costs of the services (investment services and ancillary services) and the costs of the financial instrument, for example the transaction costs that a fund incurs when buying and selling securities. On top of that, the investment firm must make use of an illustration to give its client insight into the cumulative effect of the total costs on the return. The costs must be disclosed at least once a year.
The new product governance requirements under MiFID II also came became applicable on 3 January 2018 for the marketing, distribution and sales of financial products. Within these new requirements, manufacturers will need to identify and take reasonable steps to distribute their financial products to a target market of end clients. They will need a product approval process and to review periodically the target market and performance of the investment products they offer. Distributors will need sufficient understanding of manufacturers’ products and product approval process so as to identify and to sell to their own identified target market.
Our ABACUS/Transactions solution supports transaction reporting under Article 26 MiFIR as well as commodity derivates position reporting under Article 58 of MiFID II.Find out more