On July 28, 2016, the European Commission adopted a Commission Delegated Regulation in the form of RTS supplementing MiFIR. MiFIR will, from January 3, 2018, require an investment firm to report complete and accurate details of transactions in financial instruments no later than the close of the following business day to its national regulator. One of the purposes of the reporting obligation is for national regulators to undertake market surveillance, including to monitor for market abuse.
The adopted RTS specifies which transactions are subject to the reporting obligation and stipulates when an investment firm will be considered to have executed a transaction for the purposes of the MiFIR reporting obligation. For example, the purchase of a financial instrument or entering into of a derivative contract can constitute an acquisition and the sale of a financial instrument and the closing out of a derivative contract would constitute a disposal. Execution of a transaction can include, among other things, performance of services that have resulted in a transaction such as the reception and transmission of orders for one or more financial instruments or executed orders on behalf of clients. The fields to be reported are set out in the annex to the adopted RTS. There are some exclusions to the reporting obligation, such as securities financing transactions under and contracts arising exclusively for clearing or settlement purposes.
To comply with the reporting obligation, firms will need to identify themselves using their legal entity identifiers, identify their client using the client’s LEI, identify any individual referred to in the report (using specific formats provided for in the adopted RTS) and will also have to identify any individual or algorithm that made the investment decision. A transaction report must include information about any change in the position of a firm or its client and short sales will need to be flagged.
The adopted RTS must still be approved by the European Parliament and the Council of the European Union and be published in the Official Journal before entering into force.
The adopted RTS will apply, for the most part, from January 3, 2018, in sync with the implementation of MiFID II. The adopted RTS on the reporting obligation is available at: https://ec.europa.eu/transparency/regdoc/rep/3/2016/EN/3-2016- 4733-EN-F1-1.PDF.
The Annexes are available at: https://ec.europa.eu/transparency/regdoc/rep/3/2016/EN/3-2016-4733-EN-F1-1-ANNEX-1.PDF.