MTF / OTF / RM On-Venue
Obligation iw with MTF / OTF / RM
( regardless if you are buying or selling )
How are you transacting ?
Is your counterparty an SI ?
Yes
Obligation is with the SI
No
Are you the seller ?
Yes
Obligation is with you via an APA
No
Obligation is with your counterparty
OTC / SI Off-Venue
Is your counterparty regulated in the EU ?
Yes
No
Obligation is with you via an APA
* Considerations must be made when trading off-venue if your counterparty is transacting on a matched principal basis in order to ensure a single report is made challenge the buy-side faces in complying with the new best execution and compliance requirements . For example , if you choose to trade with a broker who offers to transaction report on your behalf over one that does not , how can you be sure that the reporting broker is offering the best price ? Lastly , the buy-side must take steps to ensure that no transactions fall through the cracks and are reported ( for example when trading with a non MIFID and / or non EEA broker ).
For their part , sell-side brokers will have to consider whether they are prepared to offer a delegated reporting service and whether the prohibitions on inducements force them to charge for providing it .
Faced with the prospect of sending multiple , potentially reluctant , brokers extra information to supplement their initial order , many buy-side firms are opting to report to regulators directly via an Approved Reporting Mechanism ( ARM ), such as Trax . This enables them to have a single process for transaction reporting and potentially benefit from longer operational deadlines in meeting the T + 1 timing requirement . Reporting via an ARM also facilitates transactions executed via a Non-EEA broker , ensuring complete compliance with the MiFID II transaction reporting obligation . reports , and only satisfies its own obligation in respect of itself . Under this exemption , the buy-side are relieved of the obligation to report if they have ‘ reasonable grounds ’ to be satisfied that the broker will make a transaction report to the regulator . In order to have “ reasonable grounds ”, FCA guidance 4 is no more onerous than an annual confirmation that the broker continues to be a MIFID firm .
MIFID II requires instead that a buy-side firm may rely on its broker to make a separate report on its behalf ( in addition to the broker ’ s own report ) through a transmission of order arrangement . Even if sell-side brokers are willing to perform this as a delegated service , the key difficulty will be completing this report from
4 TRUP ( Transaction Reporting User Pack ) 9.7.1 the perspective of the buy-side . The information required to complete a transaction report under MIFID II is considerably broader than under MIFID I – the number of reporting fields expands from 26 to 65 and includes personal data regarding the investment committee that approved the transaction needs to be identified , as do the details of any underlying client . If buy-side firms wish to avoid the obligation to transaction report , they must become comfortable with sending this type of detailed information about their clients to their brokers , in addition to the execution instructions in order to enable the broker to complete transaction reports on their behalf . In addition to the outsourcing obligations discussed above , it may also complicate the considerable
Industry Readiness It seems highly likely that different firms will reach varying conclusions , based on the size and complexity of their businesses , as to how they comply with the MIFID II trade and transaction reporting requirements . The key issue is really to raise industry awareness of the forthcoming requirements to avoid , or at least minimise , a chaotic rush to the finish line when MIFID II is implemented . l
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