MiFIR Final Report Analysis
On 30 March 2021, ESMA published the final report on the back of the consultation paper from 24 September regarding MiFIR transaction reporting and reference data reporting. While some of the suggestions from the consultation were cut out from the final report, there are still many proposed changes worth taking note of as they are quite significant.
The final report is of special interest to asset management companies where ESMA now proposes an extension to the reporting requirements under MiFIR article 26 to include AIFM/UCITS management companies providing MiFID services. This will level the playing field with the investment firms that have already been reporting since 2017.
There is no doubt this will provide challenges for the buy-side due to data management issues and the increased regulatory burden that on-boarding another EU transaction reporting regime will require.
One thing that is clear is that ESMA is taking a strategic approach to consolidate the reporting regimes as much as possible. The final report contains alignment with different aspects of EMIR, MAR and the benchmark regulation, finding common ways of reporting where possible. One specific provision that ESMA foresees is the use of the issuer LEI for reference data purposes. While some aspects of the proposed adjustments – such as the use of UTI – were ruled out, there are still multiple aspects where ESMA clearly sees a benefit of adopting similar standards and aligning the regulations.
Another important suggestion relates to including the SI approach to OTC derivatives trading. This would deem Systematic Internaliser (SI) traded OTC derivatives in scope for transaction reporting as well as reference data reporting. This would of course mean a slightly bigger reporting burden for the sell-side, and also that more instruments are in scope for reporting, as the uToTV concept will also still be in play. In essence, any transaction executed through an SI would need to be reported by both the SI and the counterparty (also when it relates to instruments that are not traded on a trading venue) broadening the scope of MiFIRa. While the volumes will increase as a result, some intricate checks of the OTC derivative can surely be abolished by the investment firms, hopefully making the in/out of scope assessment simpler.
Some more data-specific amendments that ESMA has suggested include removing the short sale indicator, but also the inclusion of three new data points:
- An indicator for buy-back programs
- information on MiFID client categories
- A specific provision around transactions pertaining to aggregated orders resulting in the execution of a transaction
Now the ball is in the hands of the European Commission to adopt these proposals and feed them into any review of the transaction reporting regime in MiFIR. The expectation is that the Commission will fully adopt the legislative proposals.
The full report can be found here: https://www.esma.europa.eu/sites/default/files/library/esma74-362-1013_final_report_mifir_review_-_data_reporting.pdf
For more information on the proposed updates to the regulations or on global transaction reporting, please contact us at email@example.com.