Original question
a) How should field 59 (Execution within firm) of RTS 22 be reported when Investment Firm A uses the execution algorithm provided by Investment Firm B?
b) Would Investment Firm A’s reporting differ if Firm B was not a MiFID II Investment Firm and therefore did not have the obligation to report this transaction under Art. 26 MiFIR?
c) Where Investment Firm B is using Investment Firm A’s membership to access the market, is Investment Firm B executing the transaction and does Investment Firm B have to transaction report?
Original language
(a) The reporting obligations are the same as where Investment Firm A decides to send an order for execution to Investment Firm B. Investment Firm A should populate field 59 with the person or algorithm identifier within their firm that is primarily responsible for using Investment Firm B’s algorithm. Investment Firm A shall not populate a code for Investment Firm B’s algo, only its own information.
The scenario is:
IF A → IF B (algorithm) → CCP (Trading Venue or Investment Firm)
Assuming that Investment Firm A is buying an instrument and dealing on own account trading capacity, and Investment Firm B is acting in “any other” trading capacity, the respective reports should be completed as follows:
| N | Field | Investment Firm A’s report | Investment Firm B’s report |
|---|---|---|---|
| 4 | Executing entity identification code | {LEI} of Investment Firm A | {LEI} of Investment Firm B |
| 7 | Buyer identification code | {LEI} of Investment Firm A | {LEI} of Investment Firm A |
| 16 | Seller identification code | {LEI} of Investment Firm B | {LEI} of CCP |
| 29 | Trading capacity | ‘DEAL’ | ‘AOTC’ |
| 59 | Execution within firm | Natural person’s ID or code of algorithm within Investment Firm A | Code for Investment Firm B’s execution algorithm |
(b) No. Investment Firm A’s reporting is the same as specified in a).
(c) Yes. Investment Firm B is conducting the activity of executing a client order according to Art. 3 of RTS 22[1]. The scenario is:
IF A → IF B (algorithm) → IF A (membership) → CCP (Trading Venue)
Assuming that both Investment Firm A is buying an instrument and dealing on own account, and the subsequent steps in Investment Firm B and A are in “any other” trading capacity, the respective reports should be completed as follows:
| N | Field | IF A’s report 1 | IF B’s report | IF A’s report 2 |
|---|---|---|---|---|
| 4 | Executing entity identification code | {LEI} of Investment Firm A | {LEI} of Investment Firm B | {LEI} of Investment Firm A |
| 7 | Buyer identification code | {LEI} of Investment Firm A | {LEI} of Investment Firm A | {LEI} of Investment Firm B |
| 16 | Seller identification code | {LEI} of Investment Firm B | {LEI} of Investment Firm A | {LEI} of CCP |
| 29 | Trading capacity | ‘DEAL’ | ‘AOTC’ | ‘AOTC’ |
| 59 | Execution within firm | Natural person’s ID or code of algorithm within Investment Firm A | Code for Investment Firm B’s execution algorithm | ‘NORE’ |
In order to match Investment Firm B’s reports and reflect its involvement in more than one part of ‘the chain’, Investment Firm A has to submit two reports:
- one for its trade as a client with Investment Firm B (Report 1).
- one for its market-side trade with the Central Counterparty or another Investment Firm (Report 2).
[1] Commission Delegated Regulation (EU) 2017/590.