Common-Mistakes

The UK’s FCA recently released Market Watch 65 identifies 5 common errors relating to MiFIR transaction reporting.

1. Unreported transaction on Non-EEA listed Index with EEA Trading Venue components

“Some firms have misinterpreted these requirements and failed to submit transaction reports for transactions executed in non-EEA listed indices or baskets composed of one or more financial instruments admitted to trading on an EEA trading venue. We expect firms to have arrangements in place to determine when an instrument is in scope for transaction reporting.” – FCA

The 3 steps below are a great guide to what makes a transaction reportable:

Step 1Is the financial instrument admitted to trading or traded on a trading venue or for which a request for trading has been done?Yes – reportable
No – go to step 2
Step 2Is the immediate underlying instrument of the financial instrument a financial instrument traded on a trading venue?Yes – reportable
No – go to step 3
Step 3Is the immediate underlying instrument of the financial instrument an index or a basket where any component is traded on a trading venue?Yes – reportable
No – not reportable

If the answer to any of these questions is yes, the financial instruments you are dealing with are reportable under MiFIR.

2. Field 47 – Underlying Instrument

Underlying instrument means immediate underlying NOT ultimate underlying. The ISIN of the underlying should be reported.

Example:

InstrumentUnderlying
Option on a future on an equityfuture
CFD on an equity optionoption contract
FTSE CFD on a futurefuture

3. Field 3 – Trading venue transaction ID code

The FCA reminded firms that it expects trading venue transaction identification code (TVTICs) to be reported when a transaction is executed on a trading venue (i.e. not OTC).

The TVTICs are generated by trading venues and disseminated to both buying and selling parties.

Example:

Venue Transaction ID
30PQ037BBB2YZLPD4F

4. Fields 8 and 17 – Country of branch fields

These fields should only be populated where the buyer or seller was a client of an investment firm.

The FCA clarified that these fields refer to the country of the branch of the investment firm that the client executed with, not the client’s location or nationality.

Example:

ScenarioCountry of branch for buyer (Field 8)Country of branch for seller (Field 17)
The UK branch of a German firm receives an order from a client to buyGBblank

5. Systems and Controls – downloading from FCA

The FCA emphasised that reconciliation of the transaction reports (handback files) against your raw data is important. The acceptance of transaction reports by the FCA does not mean that the data is accurate.  The FCA’s validation rules are not designed to identify all potential errors and omissions.

“We are encouraged by the number of data extract requests being made by firms for the purposes of reconciling their transaction reports with front office records” – FCA

The FCA also noted there is a good number of firms downloading transaction reports from the FCA Portal for reconciliation purposes. This was both an encouragement and gentle nudge to firms not currently doing so.

If you are worried about any of the above points or need help with your MiFIR transaction reporting, contact us.

Quinn Perrott

Quinn is co-CEO and founder of TRAction and focuses on assisting clients in Europe, Asia and Australia to meet their regulatory requirements with trade and transaction reporting solutions as well as development of the best execution platform. With a background in IT, Quinn started in the financial markets as IT Manager for City Index. He then co-founded and worked as a General Manager at one of Australia’s largest margin FX and CFD providers. Quinn has provided educational sessions to Australia’s regulatory bodies in relation to operational aspects of derivatives and trading platforms.