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ESMA provides guidance on transaction reporting, order record keeping and clock synchronisation under MiFID II

10 October 2016

The European Securities and Markets Authority (ESMA) has issued today final Guidelines regarding the implementation of the transaction reporting regime under the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), along with its Final Report which sets out the feedback ESMA received to its consultation on these topics.

The Guidelines provide further detail on how to implement the transaction reporting, order record keeping and clock synchronisation requirements. As the regulatory technical standard (RTS) on the reporting of transactions to competent authorities is still under the scrutiny of the European Parliament and Council, this publication is without prejudice to their possible objection to that RTS.

The purpose of the Guidelines is to provide guidance to investment firms, trading venues and approved reporting mechanisms (ARMs) in order for them to prepare for compliance with their reporting and order record keeping obligations well in advance of their entry-into-force in 2018. The publication of these Guidelines provides firms with sufficient lead time to comply with their future record keeping and reporting obligations. The Guidelines are designed to ensure consistency in the application of these requirements across EU Member States. In particular, they provide examples of transaction reports and of the order data records. Each example is accompanied by samples of xml-messages to be used to represent the expected reportable values.

These Guidelines include:

  • General principles to apply to transaction reporting and order record keeping. They provide high level approaches and further guidance on specific legislative provisions on transaction reporting and order record keeping, e.g. the meaning of transaction, the concepts of “order” and “member or participants of a Trading Venue”
  • Reporting and record keeping scenarios for the various trading scenarios that may occur. In particular, transaction reporting resulting from transmissions of orders, grouped orders, and the provision of Direct Electronic Access (DEA); and order record keeping in the case of central limit order books and request for quotes systems.
  • Reporting specific financial instruments: most examples are focused on derivatives given that these financial instruments have a more complex reporting pattern.
  • Clock synchronisation clarifications: the Guidelines provide further guidance on specific legislative provisions, e.g. the concepts of “reportable events” and “gateway-to-gateway latency”.

The Guidelines are addressed to national competent authorities (NCAs) and financial market participants who must make every effort to comply with them. NCAs to whom the Guidelines apply should comply by incorporating them into their supervisory practices, including where particular guidelines within the document are directed primarily at financial market participants. NCAs must also notify ESMA whether they comply or intend to comply with the Guidelines, with reasons for non-compliance, within two months of publication of the guidelines in the 23 official languages of the EU.

Next steps

The Guidelines will be supplemented by related technical documents on reporting instructions. In particular, these technical documents include: (i) the transaction reporting validation rules specifying the criteria of acceptance of transaction reports by the NCAs and conditions under which fields are not applicable and should not be populated and (ii) the XML schemas of the candidate ISO 20022 messages. These documents are referred to in the Guidelines and are expected to be published by the end of October 2016.