Since Brexit, MiFIR reportability has stayed the same for UK firms but has narrowed in scope for EU firms (as they no longer have to consider the UK in their TOTV scope).
It is also important to note that Brexit prompted a new framework of the MiFID systems so that the ESMA Financial Instruments Reference Database (FIRDS) and ESMA Financial Instruments Transparency System (FITRS) are now operating in addition to the equivalent UK systems as established by the FCA – the FCA FIRDS and FCA FITRS.
Ascertaining MiFIR reportability
When ascertaining whether a product is MiFIR reportable, one of the things you need to find out is if the product is traded or admitted to trading on a ‘Trading Venue’ (TV). A significant question for UK firms would be – does a product that trades in the EU satisfy the ‘Traded on a Trading Venue’ part and therefore make it UK MiFIR reportable?
After the departure of the UK from the EU on 31 January 2020 (Brexit), MiFIR was bifurcated into 2 regimes – EU MiFIR and UK MiFIR. Under MiFIR, there is an obligation to report financial instruments that are traded or admitted to trading on a trading venue (TOTV).
A key difference between the 2 regimes in relation to MiFIR reportability of financial instruments is in the definition of a TV. Article 26 of EU MiFIR refers to TVs that are located in the EEA. Therefore after Brexit, UK TVs were excluded. Whereas Article 26 of UK MiFIR still includes reference to TVs being in the UK, Gibraltar or the EU:
‘26(2) The obligation laid down in paragraph 1 shall apply to:
(a) financial instruments which are admitted to trading or traded on a [F2UK, Gibraltar or EU trading venue] or for which a request for admission to trading has been made;’
TVs under both regimes are regulated markets, multilateral trading facilities (MTFs) and organised trading facilities (OTFs).
What is a Trade on Trading Venue (ToTV)?
TVs are platforms that operate organised markets, which allows for the purchasing/selling of financial instruments. See our article here for more information relating to TVs.
The ‘TOTV’ concept is actually not defined in MiFID II/MiFIR. TOTV are instruments that are traded on TVs which are centrally issued and standardised e.g. shares, bonds and exchange traded derivatives. (ESMA and the FCA are of the view that only OTC derivatives with the same reference data information as the derivatives being traded on venue should be treated as a TOTV).
Brexit impacts on MiFID II/MiFIR
After Brexit, the EU and UK required the licensing of trade repositories (TRs) and approved reporting mechanisms (ARMs) (i.e. an authorised person to report MiFID trade reporting to domestic competent authorities or ESMA (for investment firms)) to be under the jurisdiction where they received reports.
TRs and ARMs that before Brexit, were operating with one ESMA authorisation, now require separate authorisation from both ESMA and the FCA. Some TRs and ARMs may not have obtained authorisation for registration of their TR or ARM businesses in both jurisdictions, merely operating out of one jurisdiction. For more information on the changes to MiFIR and EMIR post-Brexit, please see our article here.
Post Transitional Period
- ESMA restricting FCA accessing systems
Since 2 January 2021, UK TVs are not considered as an EU TV and therefore ESMA has prevented the FCA from accessing its 2 MiFID systems:- ESMA FIRDS – shows reference data for MiFID products TOTV in the EU; and\
- ESMA FITRS – shows information relating to reference and quantitative data, waiver thresholds and liquidity.
- UK response to ESMA’s actions
In order to have continued operational support for UK firms, the FCA built equivalent MiFID systems – the FCA FIRDS and FCA FITRS. These are now operating in addition to ESMA FIRDS and ESMA FITRS.
Examples – MiFIR reportability when trading on TVs in EU & UK
We have given some examples below on financial instruments (and assuming they are in-scope products) being traded on EU and UK TVs and their MiFIR reportability:
| Scenario | Reportability |
|---|---|
| A Cyprus brokerage firm enters into a trade on a product that is admitted to trading on a UK trading venue (eg. Vodafone shares on the London Stock Exchange) | Not EU MiFIR reportable, as UK TVs are out of scope under EU MiFIR and EU MiFIR applies to firms in Cyprus/EU. |
| A German bank enters into a trade on a product that is admitted to trading on an EU trading venue (eg. Deutsche Bank shares on the Frankfurt Stock Exchange) | Is EU MiFIR reportable, as EU TVs are in-scope under EU MiFIR and EU MiFIR applies to firms in Germany/EU. |
| A UK brokerage firm enters into a trade on a product that is admitted to trading on an EU trading venue (eg. Deutsche Post shares on the Frankfurt Stock Exchange) | Is UK MiFIR reportable, as EU TVs are in-scope for UK MiFIR and UK MiFIR applies to UK firms. |
How can TRAction assist?
For finer details relating the process changes after Brexit with your ToTVs, please refer to the FCA’s website. For more information on EMIR and MiFID II/MiFIR, please get in touch with us.
References
FCA website – ‘MiFID reporting after the Brexit transition period’
Article 26 – EU MiFIR and UK MiFIR
