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. What is an ISIN?
An ISIN is a unique code that is used to identify a financial instrument (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.
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2. 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 first attribute. They are both cash settled so the only difference is the fifth character which relates to the differing ‘return or payout trigger’ (the third attribute for forwards).
3. EMIR Reporting
Under the revised EMIR RTS, the CFI and ISIN will 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.
b) Product identification – reporting of ISIN
The ISIN is the only method available for identifying instruments in EMIR transaction reports.
4. MiFID II/MiFIR Reporting
The ISIN is required to be reported for MiFIR reporting. Where an ISIN is not available, you will be required to report a CFI and possibly other information.
a) Reporting of ISIN
Where an ISIN 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 to be expanded to identify OTC derivatives traded on venue or by a systematic internaliser (SI). This aligns 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”. Commission Delegated Regulation (EU) 2017/585 of 14 July 2016.
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 an SI), 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.
5. The Identifier Framework
Any trade will have counterparties, take a particular transaction form and involve certain products or instruments. The unique trade identifier (UTI) is used to identify transactions under EMIR, and the transaction reference number (TRN) is used for MiFIR. The legal entity identifier (LEI) represents the legal entity issuing the security. Lastly, combinations of CFIs and ISINs 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 us.