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 1||Is 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 2||Is the immediate underlying instrument of the financial instrument a financial instrument traded on a trading venue?||Yes – reportable |
No – go to step 3
|Step 3||Is 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.
|Option on a future on an equity||future|
|CFD on an equity option||option contract|
|FTSE CFD on a future||future|
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.
|Venue Transaction ID|
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.
|Scenario||Country 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 buy||GB||blank|
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.