Reporting of a wide range of identification and classification codes is one of the major aspects of transaction reporting. The range of product identifier codes required by the reporting regimes of EMIR and MiFIR includes:
- International Securities Identification Number (“ISIN”);
- Classification of Financial Instruments (“CFI”); and
- Alternative Instrument Identifier (“Aii”).
Use the decision tree below to help to determine which product identifiers you should be reporting.
1. EMIR Reporting
Under the revised EMIR RTS, the CFI and ISIN need to be submitted with transaction reports.
a) Product classification – reporting of CFI
‘Product Classification’ is a mandatory field in EMIR transaction reports under the revised EMIR RTS. Until the introduction of an ESMA endorsed Unique Product Identifier (“UPI”) framework, the CFI code is the only option for classifying an instrument in a transaction report.
Thus far, ESMA have not endorsed a UPI and seem unlikely to in the near future:
“ESMA did not yet receive any formal request to endorse a UPI or UTI framework and there are no details yet on how these will look like”.
b) Replacement of Aii with ISIN
Use of Aii codes in the ‘Product Identification’ field will be [UPDATE AFTER GO-LIVE] discontinued after the adoption of MiFIR Reference Data (3rd Jan 2018). From this point onwards, the ISIN will be the only method available for identifying instruments in EMIR transaction reports.
2. MiFID II/MiFIR Reporting
The ISIN is required to be reported for MiFIR reporting. Where an ISIN is not available, you are required to report a CFI and possibly other information.
a) Reporting of ISIN
Where an ISIN code for an instrument is available, it must be used to identify the instrument in a MiFID II/MiFIR transaction report. In this instance, a CFI is not required.
Use of the ISIN is expanded to identify OTC Derivatives traded on venue or by a Systematic Internaliser (“SI”) in line with the requirement of MiFIR RTS 23 relating to Reference Data:
“Prior to the commencement of trading in a financial instrument in a trading venue or systematic internaliser, the trading venue or systematic internaliser concerned shall obtain the ISO 6166 International Securities Identifying Number (“ISIN”) code for the financial instrument”.
b) Identifying information to be reported where ISIN is not available
Where there is no ISIN available (meaning that the instrument is not traded on a trading venue or with an investment firm acting as a systematic internaliser), additional fields are required to identify the instrument including the full name of the instrument, a CFI code classifying the instrument and an ISIN identifying the underlying instrument.
3. What is an ISIN?
An ISIN is a unique code that is used to identify a fungible security. Its structure is defined in International Securities Identification Number (ISO 6166). ISO 6166 is an international standard promulgated by the International Standards Organisation and has worldwide application.
4. What is the CFI and how is it used to classify products?
The CFI is a 6 character code used to classify a financial instrument, as defined in ISO 10962.
|First character||Highest level of category to which the instrument belongs – e.g. Equities (E), Debt (D), Options (O), Futures (F), Forwards (J) etc.|
|Second character||Specific groups within each category. E.g. Financial Futures (FF) Commodity Futures (FC).|
|Third to Sixth characters||Refer to each group’s main features or attributes.|
|N.B. The letter X always means Not Applicable/Undefined|
By way of example if we look at the similarities and differences between a CFD and spread-bet on an equity instrument.
The CFI code for a CFD on an equity is JESXCC
|C||Contract for difference|
The CFI code for a spread-bet on an equity is JESXSC
Both instruments are classed as Forwards (J) and have the same underlying instrument so they share the same group and 1st attribute. They are both cash settled so they only difference is the 5th character which relates to the differing ‘return or payout trigger’ (the 3rd attribute for forwards).
5. The identifier framework
The adjacent infographic shows where the different identifiers fit in to the reporting framework in many jurisdictions around the world. Any trade will have counterparties, take a particular transaction form and involve certain products or instruments. The Legal Entity Identifier (“LEI”), Unique Trade Identifier (“UTI”) for EMIR and Transaction Reference Number (“TRN”) for MiFIR and combinations of CFIs & ISINs respectively are used to identify these elements so that a trade can be holistically defined.
If you would like to discuss the above or learn how it may apply to you, get in touch with TRAction Fintech.