A Systematic Internaliser (SI) is an investment firm that, when executing client orders over-the-counter (OTC), multilateral trading facility (MTF), or organised trading facility (OTF), deals on its own account in an organised, frequent, systematic and substantial manner without operating a multilateral system (see Article 4(1)(20) of MiFID II).
Summary
- The question of whether an International Securities Identification Number (ISIN) is required to be used or not depends on the product traded, not the SI.
- An ISIN must be populated when the ‘Venue of Execution’ field contains a market identifier code (MIC) of a trading venue within the EU.
- An ISIN is optional when the ‘Venue of Execution’ field contains a MIC of a SI.
- An ISIN must be blank in all other scenarios, and under which, the UPI is expected to be populated.
The EMIR Refit Validation Rules apply in the EU from 29 April 2024 and in the UK from 30 September 2024 – see relevant regulations below:
FCA – UK EMIR Refit Validation Rules –
https://www.fca.org.uk/publications/consultation-papers/changes-uk-emir-reporting-requirements-draft-questions-answers
ESMA – EU EMIR Refit Validation Rules –
https://www.esma.europa.eu/data-reporting/emir-reporting#:~:text=When%20reporting%20under%20EMIR%20REFIT,ensure%20that%20reporting%20is%20performed
For more details on SIs refer to this article.
ESMA’s requirements – EU EMIR Refit Validation Rule
- Under the EU EMIR Refit Validation Rules, if the ‘Venue of Execution’ field is populated with a MIC of a trading venue (RM, MTF or OTF), or of a SI or with a MIC ‘XOFF’, then an ISIN should be populated.
- Once an ISIN is populated, the ‘Venue of Execution’ field should contain 4 alphanumerical characters.
ESMA’s subsequent advice
“In this case the validation requiring ISIN for all derivatives traded on a Systematic Internaliser is too restrictive and we will consider removing it’’.
(see row 63 of the “WG Questions” tab of this document)
ESMA’s updated requirements
The EU EMIR Refit Validation Rules were subsequently updated to say ISIN is optional if the ‘Venue of Execution’ field is the MIC of an SI. Since this is now optional in cases where it is not populated when required under Article 6(b), then the relevant UPI will be required.
If you are interested in learning more, please reach out to our team at TRAction.
