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Point Nine
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Post Trade Excellency
Point Nine
MiFID II/ MiFIR: Everyone is talking about THESE
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Agenda
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• Best Execution
• Investment Firm Publication Requirements
• Execution Venue Data Publication Requirements
• Differences between MTF, OTF and SI
• Differences between hybrid trading systems
• Transaction Reporting
• Trade Reporting
• Financial Instrument Reference Data
• Commodities Position Reporting
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Best Execution
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Who needs to publish the information?
Investment Firms that execute client orders on EU and third country execution venues
What needs to be published?
• Data for each of the top 5 execution venues in terms of trading volumes where the firms executed
client orders in the preceding year.
• Information on the volume and number of orders executed on each execution venue
• Information is published in respect of each class of financial instruments.
The classes of financial instruments referred are:
• Information should be provided separately for retail and professional clients respectively
Quantitative Data
Investment Firm Publication Requirements (RTS 28)
Equities
Debt instruments
Interest Rates
Credit
Currency
CFDs
Emission Allowances
Securitised and Commodities Derivatives
SFTs
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Qualitative Data – assessment of quality of execution
Execution factors of
price, costs, speed,
likelihood of
execution and others
Close links, conflicts
of interest and
common ownership
Specific arrangements
regarding payments
made/ received,
discounts, rebates or non-
monetary benefits
received
Factors that led to a
change in the list of
execution venues
listed in the firm’s
execution policy
An explanation of
how order execution
differs according to
client categorisation
Criteria given
precedence over
immediate price and
cost when executing
retail client orders
Data or tools relating
to the quality of
execution
Output of a
consolidated tape
provider
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Where information should be published?
Information should be published on the website of the investment firm, in a machine-readable format,
available for downloading by the public.
How frequently should information be published?
Annually.
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Execution Venue Data Publication Requirements (RTS 27)
Who needs to publish the information?
• Trading Venues:
• Systematic Internaliser - An investment firm that deals on its own account by executing client orders outside a Trading Venue.
Purpose is to ensure the internalization of order flow by investment firms does not undermine the efficiency of price formation on RMs, MTFs
and OTFs
• Market Makers
• Other Liquidity Providers
A multilateral system ran and/or managed by a market operator subject to enhanced government requirements which gathers or
facilitates the gathering of multiple third-party buying and selling in financial instruments
Regulated Market (RM)
A multilateral system ran by an investment firm or a market operator, which gathers multiple third-party buying and selling in financial
instruments
Multilateral Trading Facility (MTF)
A multilateral system which facilitates a multiple third-party buying and selling interests in bonds, structured finance product, emission
allowances and derivatives. An OTF is not a RM or an MTF and unlike those, an OTF has the discretion as to how to execute orders
Organised Trading Facility (OTF)
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MTF Vs OTF Vs SI
MTF OTF SI
Financial Instruments All Non-equities only All OTC
Matching system Non-discretionary Discretionary Discretionary
Restrictions • Cannot execute client
orders against
proprietary capital
• Cannot trade on
matched principal
• Cannot execute client
orders against
proprietary capital
• Market making is
independent
• Matched principal is
allowed if client is
informed
• Cannot operate an SI
• Cannot operate a
multilateral trading
system
Participants Regulated Regulated and
Unregulated
Clients only
Trading in a Matched principal: For matched trading capacity the investment firm is dealing on own account for a client. A transaction
where the facilitator interposes itself between the buyer and the seller to the transaction in such a way that it is never exposed to market
risk throughout the execution of the transaction, with both sides executed simultaneously.
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What needs to be published?
Fo
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at is
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Publish certain information including but not limited to:Differentiate the amount and nature of reported data
according to:
Request for
quote
Continuous
auction order
book
Continuous
quote driven
Any other
hybrid system
Trading Systems
Trading Models
Trading Platforms
Information on Execution Venue and Financial Instrument
Price Quality
Costs applied by the Execution Venue
Speed of execution
Likelihood of Execution
Settlement Size
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What are the different hybrid trading systems?
Type of System Description
Request for quote A trading system where a quote or quotes are provided in
response to a request for quote submitted by one or more
members or participants. The quote is executable exclusively by
the requesting member or participant. The requesting member or
participant may conclude a transaction by accepting the quote or
quotes provided to it on request.
Continuous auction order book A system that by means of an order book and a trading algorithm
operated without human intervention matches sell orders with
matching buy orders on the basis of the best available price on a
continuous basis.
Quote driven A system where transactions are concluded on the basis of firm
quotes that are continuously made available to participants, which
requires the market makers to maintain quotes in a size that
balances the needs of members and participants to deal in a
commercial size and the risk to which the market maker exposes
itself.
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Where information should be published?
Information should be published, in a machine-readable format, available for downloading by the public.
How frequently should information be published?
Reporting frequency Reporting reference dates Reporting period
Quarterly
31 March (Q1) 1 October-31 December
30 June (Q2) 1 January-31 March
30 September (Q3) 1 April-30 June
31 December (Q4) 1 July-30 September
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Transaction Reporting
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
Financial counterparties
Non-financial counterparties exceeding the clearing threshold as defined under EMIR 10(1)(b)
Investment managers providing advice and portfolio management on a client-to-client basis
Credit Institutions
Market operators/ Trading Venue
Central Counterparties
Third- country firms providing investment services or activities within the EU
Who needs to report?
The transmission of orders “exemptions” – RTS 22 Article 4
Discretionary investment managers can rely on their brokers ( assuming they are MiFID investment firms) to make the report on their behalf if a number of important conditions are
met. Conditions include:
1. The “transmitting firm” is only deemed to have successfully transmitted an order when it has sent certain specific details to the “receiving firm”, including the details of the
trade, the client or clients for whom the transaction has been made
2. Have a written transmission agreement in place with the receiving firm
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
What to report?
3. Financial instruments where the underlying is an index or a basket composed of financial instruments traded on an EU trading venue. This means that just one
component of either index or basket will bring that financial instrument under the reporting obligation
2. Financial instruments where the underlying is a financial instruments traded on an EU trading venue
1. Financial instruments admitted to trading or traded on an EU trading venue or for which a request for admission to trading has been made
The only financial instruments that still fall outside MiFIR’s scope are:
Segregated collateral transfers in bilateral transactions
SFTs
Give-ups or give-ins
The issuance, allotment, subscription or exercise of pre-emption rights
The obligation shall apply to transactions in financial instruments referred
to above irrespective of whether or not such transactions are carried out
on an EU trading venue.
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
Reportable Instruments
1. Equities – Shares and Depositary Receipt
2. Debt Instruments
Bonds
Money Market Instruments (e.g. T-Bill)
3. Interest Rate Derivatives
Futures and options admitted to trading on a TV
Swaps, forwards, FRAs and other
4. Credit Derivatives
Futures and options admitted to trading on a TV
Other
5. Currency Derivatives
Futures and options admitted to trading on a TV
Swaps, forwards, FRAs and other
6. Structured finance products (e.g. CDSs)
7. Equity Derivatives
Futures and options admitted to trading on a TV
Swaps and other
8. Securitised Derivatives
Warrants and Certificate Derivatives
Other
9. Commodities derivatives
Futures and options admitted to trading on a TV
Swaps, forwards and other
10. CFDs
11. Exchange Traded Products – ETFs, ETNs, ETCs
ETPs that track an index, commodity, bonds and other
12. Emission allowance
13. Units in collective investment undertakings
and Other
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
Reportable and non-reportable transactions
1. Transfers of financial instruments between funds or portfolios are reportable as they constitute an acquisition and disposal from one fund/portfolio to the other
2. Transfer from an account held by a client to a joint account where the client is one of the joint holders is reportable
3. A custodian/ nominee decides to move financial instruments from one depository bank to another depository bank - there is no transaction reporting
obligation for the movement of the financial instruments since this activity has arisen solely as a result of custodial activity
4. A client transfers financial instruments to a custodian/nominee to hold in its custodial/ nominee account- there is no transaction reporting obligation for this
transfer as it is solely connected to custodial activity
5. Creation and redemption of a fund by the administrator of the fund is not reportable
6. Exercising a financial instrument such as an option, a covered warrant, a convertible or exchangeable bond, an allotment right or a subscription right by the
owner of the financial instrument does not trigger transaction reporting obligations for the investment firm exercising the option or the investment firm
being exercised against. Where the exercise results in the delivery of another financial instrument this is also not reportable by either the investment firm
exercising the option or by the investment firm being exercised/ assigned against.
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
Reportable and non-reportable transactions
7. Acquisitions or disposals in connection with mergers, takeovers, insolvency proceedings, stock splits or reverse stock splits are not reportable.
8. The creation, expiration or redemption of a financial instrument as a result of pre-determined contractual terms, or as a result of mandatory events which are
beyond the control of the investor where no investment decision by the investor takes place at the point in time of the creation, expiration of the financial
instrument is not reportable.
The only exemptions are activities in relation to IPOs, secondary public offerings or placings of debt insurance, where these transactions are reportable.
e.g.: A new company launches an IPO, and therefore there are no allotment rights. Investment firm X applies for shares via IPO and receives those shares. A
request for admission to trading has been made although the shares have not yet started trading
The acquisition of the shares is reportable
The reporting obligation would also apply in case of a secondary public offer or placing, where there are no allotment rights
e.g.: Investment Firm X holds bonds in a company that have 5-year maturity. Under the terms of the issuance, the company has the right to redeem a portion of
the financial instruments prior to maturity. In Year 3, the company redeems a portion of the nominal value of the bond issuance. There is no obligation to report
in relation to the redemption of the bond. This is because it is the result of pre-determined contractual terms which are outside the control of the investor.
9. The issuance of script dividends are not reportable as this involves the creation of financial instruments as a result of pre-determined contractual terms where
no investment decision is made by the investor at the time of the instruments' creation.
10. Acquisition under a dividend reinvestment plan is not reportable.
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
Reportable and non-reportable transactions
11. An exchange or tender offer on a bond or other form of securitised debt where the terms and conditions of the offer are pre-determined is not reportable.
e.g.: A company makes a tender offer to purchase back its bonds from investor at a premium. The conditions for the offer had already been published in an
information disclosure or prospectus
12. Securities Financing Transactions are not reportable
13. A holder of a financial instrument or convertible bond exercises a financial instrument or convertible bond. As a result of this exercise or conversion, investment
firm X (the party being exercised against) acquires or disposes of underlying financial instruments (e.g. on a trading venue) so that it can deliver these instruments
to the holder:
A transaction report shall be submitted in relation to the acquisition/disposal of the underlying financial instruments (e.g. the on-venue acquisition).
However, there is no transaction reporting obligation in relation to the transfer of those underlying financial instruments to the holder or in relation to the
exercising/conversion of the financial instrument.
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M i F I R R e p o r i n g R e q u i r e m e n t s
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65 Reporting Fields for Transaction Reporting
General Fields
Report Status
Transaction Reference Number
Trading Venue Transaction Identification Code
Executing Entity Identification Code
Investment Firm Covered by Directive 2004/39/EC or Directive 2014/65/EU
Submitting Entity Identification Code
Buyer Identification Code
Country of the branch for the buyer
Buyer National Identification code
Buyer- First Name
Buyer- Surname
Buyer- Date of Birth
Buyer
Buyer Decision Maker Code
National Identification Code
Buyer Decision Maker- First Name
Buyer Decision Maker- Surname
Buyer Decision Maker- Date of Birth
Buyer Decision Maker
Trading Date Time
Trading Capacity
Quantity
Quantity Currency
Derivative Notional Increase/Decrease
Price
Price Currency
Transaction Details
Seller Identification Code
Country of the branch for the seller
Seller National Identification Code
Seller- First Name
Seller- Surname
Seller- Date of Birth
Seller
Seller Decision Maker Code
National Identification Code
Seller Decision Maker- First Name
Seller Decision Maker- Surname
Seller Decision Maker- Date of Birth
Seller Decision MakerTransmission of order indicator
Transmitting firm identification code for the buyer
Transmitting firm identification code for the seller
Transmission Details
Investment decision within firm
Country of the branch responsible for the person making the investment decision
Execution within firm
Country of the branch supervising the person responsible for the execution
Trader and Algorithms
Waiver Indicator
Short Selling Indicator
OTC post-trade Indicator
Commodity derivative Indicator
Securities Financing Transaction Indicator
Indicators
Instrument Identification Code
Instrument Full Name
Instrument Classification
Notional Currency 1
Notional Currency 2
Price Multiplier
Underlying Instrument Code
Underlying Index Name
Instrument Details
Term of the underlying Index
Option Type
Strike Price
Strike Price Currency
Option Exercise Style
Maturity Date
Expiry Date
Delivery Type
Net Amount
Venue
Country of the branch Membership
Up-front Payment
Up-front Payment Currency
Complex Trade Component ID
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
Personal Data Required Information Examples
Where the buyer is a legal entity, the LEI code of the buyer shall be used.
Where the buyer is a non-legal entity, IDENTIFIER should be used:
The IDENTIFIER shall be assigned in accordance with priority levels depending on the country. The first priority is usually the national number. The second priority is usually CONCAT.
CONCAT is structed as below:
(a) First Name
(b) Surname
(c) Date of Birth
Buyer
Where the decision is made by an investment firm, this field shall be populated with the identity of the investment firm rather than the individual the individual making the investment decision.
Where the decision maker is a legal entity, the LEI code of the decision maker shall be used.
Where the buyer decision maker is a non-legal entity, IDENTIFIER should be used:
The IDENTIFIER shall be assigned in accordance with priority levels depending on the country. The first priority is usually the national number. The second priority is usually CONCAT.
Buyer Decision Maker
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
Where to report?
Investment firm itself
Approved Reporting Mechanism (ARM)
Trading Venue
Transaction reports shall be made to NCAs by:In case one of the branches of the EU investment firm reports part or all of the
transactions of the investment firm, it will have to report the transactions to the
home competent authority of the investment firm and not to the host
competent authority of the branch.
In case an investment firm delegates it reporting to a trading venue
or an ARM, it means that this trading venue or this ARM will have to
report to home competent authority of the investment firm on
whose behalf it reports and not to the competent authority of the
Trading Venue or ARM submitting the transaction report
Exemptions:
Branch of a non-EEA firm has the obligation to report its
transactions.
(i) In case the non-EEA firm has only one branch within the
EEA, it will report to the host competent authority of that
branch
(ii) In case the non-EEA firm has branches in multiple
jurisdictions, it will choose one of the host competent
authorities of its branches and report all transactions to
the competent authority.
Home CA Vs Host CA
Home member state competent authority and the CA
from the host member state may deviate from the
general rule.
IFs are advised to contact their home CA to ask for
which member states such a deviation exists and
under what conditions transactions need to be sent to
the home CA and under which conditions they need to
be sent to the host CA.
TV reporting transactions executed on their platform by
members that are not investment firms
In this case, there is no home competent authority for the
investment firm, as there in no investment firm involved.
The trading venue will have to report the transaction to its
own competent authority.
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Transaction Reporting
Final Check List
✓ Make sure you have a LEI
All reporting firms should identify themselves with a LEI. This means that a firm should make sure that it has acquired a
LEI for itself and validate that its counterparties also identify themselves with a LEI.
✓ Personal Data: Ensure you have the required protection controls in place
MiFIR requires that firms provide some personal data (first name, surname and date of birth, national identification
number) for the buyer, seller and the decision makers for both sides irrespective of their nationality. Firms should make
sure that they have the required protection controls and legal documents in place for the distribution of these data.
✓ Check your Data Collection Capability for the 65 fields
Different information required for reporting should be gathered from different sources. Make sure you know from which
source each information should be extracted.
✓ Familiarise yourself with the MiFID II glossary
MiFID II glossary can be found here
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Trade Reporting
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If you are: The obligation is with:
Executing on a venue ( MTF, OTF, RM) Venue
Executing with an SI SI
Transacting off-venue other than your counterparty is
an SI
“Seller”
Cases where the obligation goes to the buy-side
Buy-side transacting off-venue and the counterparty
is not regulated in the EU ( e.g. the broker is not a
MiFIR firm)
Buy-side via an APA
Buy-side is the seller, transacting off-venue, and the
counterparty is regulated in the EU but it’s not and SI
Buy-side via an APA
Who needs to report?
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M i F I R R e p o r i n g R e q u i r e m e n t s
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Trade Reporting
What to report?
As close to real time as technically possible and in any case:
For bonds, structured finance products, emission allowances and derivatives :
1. within 15 minutes after the execution of the relevant transaction from 3 January 2017 until 1 January
2020
2. within 5 minutes after the execution of the relevant transaction after 1 January 2020
Where to report?
How frequently to report?
Reporting includes:
Trading date and time
Price
Quantity
Venue of execution
Only through an authorised Approved Publication
Arrangement (APA)
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Financial Instrument Reference Data
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Financial Instrument Reference Data (RTS23)
Who needs to report?
• Trading Venues
• Systematic Internalisers
What to report?
Details on financial instruments
Where to report?
National Competent Authority.
How frequently to report?
• Shall be submitted before trading the financial instrument that it refers to commences.
• Shall be updated whenever there are changes to the data with respect to a financial instrument
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Commodities Position Reporting for
Investment Firms
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MiFID II Position Reporting for Investment Firms
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Who needs to report?
• Members and participants of trading venues (MTFs, OTFs and RMs) shall report their positions as well as the positions of their clients and
the positions of the clients of their clients and so on down to the end client.
• Investment firms which undertaking trading outside a trading venue (Economically Equivalent OTC contracts) shall report their positions
as well as the positions of their clients and the positions of the clients of their clients and so on down to the end client.
What is the definition of a “client”?
Any natural or legal person to whom an
investment firm provides investment or
ancillary services.
Determining the “client” and the “end client” under different cases:
1. Investment firms dealing on their own account will not have a “client” and so they shall report only their positions
2. If the client of an investment firm is not itself an investment firm, then the client must be the “end client”
3. If the client is an investment firm, but does not provide investment or ancillary services to another person, then
the investment firm is also the “end client”
4. If an investment firm enters into an Economically Equivalent OTC contract with another investment firm, neither
firm may be providing investment or ancillary services to the other and so this contract does not involve any client
5. If an investment firm has a trading counterparty which is not the firm’s client then the investment firm is not
required to report the positions of that counterparty
FCA consults the possibility of both trading
venues and investment firms to send
positions to NCA through third-party
technology providers.
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MiFID II Position Reporting for Investment Firms
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What to report?
Both listed and economically equivalent OTC contracts (EEOTC) across all maturities on:
Commodity derivatives Emission allowances Derivatives on emission allowances
What is an economically equivalent OTC contracts?
Based on RTS 21 Article 6, An OTC derivative shall be
considered economically equivalent to a commodity
derivative traded on a trading venue where it has
identical contractual specifications, terms and
conditions, excluding post trade risk management
arrangements, to those of that commodity derivative
traded on a trading venue.
Examples of a commodity derivative include but not limited to:
• Derivative contracts on energy products like electricity, natural gas or liquefied natural gas
• Securitised derivatives in one or more commodities
• Derivative contracts relating to indices if the underlying index is materially based on commodities. An underlying
index derivative is materially based on commodities if such commodities have a weighting of more than 50% in the
composition of the underlying index
• A commodity derivative contract in the legal form of a “spread” or “diff”. This is a cash-settled contract whose value
is determined by the difference between two reference commodities which may vary in type, grade, location, time
of delivery, or other features
• Derivative contracts where the derivative or the underlying derivative relate to climatic variables, freight rates,
inflation rates and others, can be settled in cash and are traded on a regulated market, OTF, or MTF
• Derivative contracts relating to commodities that must be settled in cash or may be settled in cash
• Derivative contract relating to commodities that can be physically settled provided that they are traded on a
regulated market, a MTF, or an OTF, except for wholesale energy products traded on an OTF that must be
physically settled
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MiFID II Position Reporting for Investment Firms
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Where to report?
• Members and participants of a RM, a MTF and clients of an OTF shall report to the trading venue. The latter must then provide the reports
to the NCA.
• Investment firms undertaking trading outside a trading shall report to the relevant NCA.
What is a “relevant NCA”?
The Competent Authority of the Trading Venue where the commodity derivatives or emission allowances or derivatives thereof are traded or the central competent
authority where the commodity derivatives or emission allowances or derivatives thereof are traded in significant volumes on trading venues in more than one
jurisdiction
How frequently to report?
Trading venues and investment firms should report their positions to the respective NCA by 22:00 CET on T+1.
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How P9 can help
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MiFIR and MiFID II Commodities Position Reporting Solution
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M i F I R R e p o r t i n g R e q u i r e m e n t s
Point Nine can help you with a fully automated solution by :
✓ Real-time connectivity to all market participants- our automated
solution is adjustable to our clients' internal and external data
sources
✓ Collecting of raw data
✓ Masking for personal data in case the customer wants the
personal data to be encrypted
✓ Eligibility of reportable data
✓ Heavy enrichment of raw data
✓ Calculation of positions
✓ Validations and matching of data before submission of the report
✓ Transaction and trade reporting automated solution
✓ Connectivity to National Competent Authorities, APAs and ARMs
✓ Acks/ Nacks processing and exception management
✓ End of day reports
✓ Full audit trail
Validations
Enrichment
Eligibility of reportable
instruments
Connectivity to NCAs, ARMs and APAs
Acks/ Nacks processing and exception management.
Transaction and Trade Reporting/ Commodities Position Reporting
Masking
the required
personal
data
Collecting
raw data
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“It is said that the devil is in the details, and this well-worn idiom is expected to prove true in the case of Market in Financial Instruments Directive II.”
Markets Media
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Get In Touch
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