2 months until MiFID II go-live in UK and Europe: what should you be doing?


With two months to go until the MiFID II go-live date of 3 January 2018, firm preparations should be underway.  Amongst the many obligations for investment firms contained within MiFID II is an enhanced and expanded transaction reporting requirement.  We examine below the main steps you’ll need to take to be ready for this requirement.

1. Determine your transaction reporting obligations

The first step is to work out whether you have reporting obligations i.e. are you are engaging in trades that need to be reported under MiFIR?  The following factors may mean that you have such obligations:

  1. You are an investment firm within the EU or an overseas firm with a branch in the EU (and some other limited circumstances for overseas firms);
  2. You are dealing in a financial instrument, as defined in Section C of Annex I of MiFID II;
  3. The financial instrument is traded on an EU trading venue – Regulated Market (RM), a Multilateral Trading Facility (MTF) or an Organised Trading Facility (OTF); and/or
  4. A financial transaction is involved, as defined Article 3 of the MiFIR RTS 22 (Regulatory Technical Standards) and it is not an excluded transaction.

Hedge trades will need to be reported as well as client-side trades.

Once you’ve determined which transactions are captured by the reporting obligations, you will need to ensure that you have access to all of the necessary information for the reporting fields, including the entity and product identifiers explained in the following paragraphs.

2. Obtain LEIs – Corporate Client Identification

All clients who are party to a transaction will need to be identified.  A corporate client will need to be identified by a Legal Entity Identifier (LEI) code.  ESMA has stated: “Investment firms shall not provide a service that would trigger the obligation of an investment firm to submit transaction reports [under MIFID II] for a transaction entered into on behalf of a client who is eligible for the legal entity identifier code, prior to the LEI being obtained from that client”.  In short, “No LEI, no trade”.  This requirement will impact client onboarding and has the potential to disrupt markets and disadvantage firms who are not prepared.

Accordingly, one of the tasks to accomplish over the next two months will be to make sure any clients who require an LEI but don’t already have one, get one before 3 January 2018.  As volumes of LEI issuance applications are at an all-time high and processing times have slowed down significantly, we suggest lodging applications as soon as possible.  LEIs are issued by the Global LEI Foundation through a number of its Local Operating Units.

3. Obtain/Find Client Identifiers – Natural Person Identifiers

Clients that are natural persons will be identified in transaction reports by their first name, surname, date of birth and an identification code that varies depending on the citizenship of the person.  This will typically be a passport number or a unique code specific to a country e.g. UK National Insurance Number.  For citizens of some countries, or where the primary mode of identification is unavailable, a CONCAT code will be required to identify the natural person which is a concatenation of the name, date of birth and country code.

Annex II of Commission Delegated Regulation (EU) 2017/590 contains a list of the identifiers to be used for citizens of each EEA country.  For all other countries, natural persons are to be identified by passport number and a CONCAT code if the passport isn’t available.

Firms will need to make sure that this data is not only in their possession but that is stored in such a way as to make it accessible for the purpose of generating reports.

4. Obtain ISIN and CFI codes

Product identification is required to be done for MiFID II, in the form of an International Securities Identification Number (“ISIN”) used to uniquely identify a security or where an ISIN is not available, a Classification of Financial Instruments (“CFI”) code used to classify a financial instrument.  ISIN codes are generally assigned by national numbering agencies, whereas the CFI needs to be attributed by you to each type of financial instrument.  TRAction Fintech generates CFI codes as part of the third-party reporting service.

If you would like to discuss the above or learn how you can become MiFID II-ready, get in touch with TRAction Fintech on +44 20 8050 1317.

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