SAP TAO - SAP Expert Consultancy and Intelligent IT Services

Disclaimers: All the information on topics is published for general information purpose only and further to be noted, this material is completely production of authors’ own research contents / material collected from various websites, conference and workshops in a close groups such as Meetup, online webinars, training video, lexical etc. I do not make any warranties about the completeness, reliability and accuracy of this information.

Tuesday, 23 May 2017

SAP TAO - Expert Intelligent IT Services: MIFIR II - FIELD BY FILED ANALYSIS -instrument de...

SAP TAO - Expert Intelligent IT Services: MIFIR II - FIELD BY FILED ANALYSIS -instrument de...: MIFIR II - FIELD BY FILED ANALYSIS The number of fields covering transaction and instrument details has increased from MiFID I to M...

Wednesday, 17 May 2017

MIFIR II - FIELD BY FILED ANALYSIS -instrument details has increased from MiFID I to MiFIR ( 24 to 65)

MIFIR II - FIELD BY FILED ANALYSIS

The number of fields covering transaction and instrument details has increased from MiFID I to MiFIR ( 24 to 65). The new fields include:

+ Derivative notional increase/decrease

+ Country of the branch membership

+ Up-front payment amount and currency

+ Complex trade component ID

+ Option exercise style

+ Delivery type

General Fields

1. Report status

2. Transaction reference number (TRN)

3. Trading venue transaction ID code

4. Executing entity ID code

5. Investment firm covered by Directive

2004/39/EC or Directive 2014/65/EU

6. Submitting entity ID code

Buyer

7. Buyer ID code

8. Country of branch

9. First name

10. Surname

11. Date of birth

Buyer Decision Maker

12. Buyer decision maker code

13. First name

14. Surname

15. Date of birth

Transmission Details

25. Transmission of order indicator

26. Transmitting firm ID code (buyer)

27. Transmitting firm ID code (seller)

Transaction Details

28. Trading date and time

29. Trading capacity

30. Quantity

31. Quantity currency

32. Derivative notional increase/decrease

33. Price

34. Price currency

35. Net amount

36. Venue

37. Country of branch membership

38. Up-front payment

39. Up-front payment currency

40. Complex trade component ID

Instrument Details

41. Instrument ID code

42. Instrument full name

43. Instrument classification

44. Notional currency 1

45. Notional currency 2

46. Price multiplier

47. Underlying instrument

48. Underlying index

49. Term of underlying index

50. Option type

51. Strike price

52. Strike price currency

53. Option exercise style

54. Maturity date

55. Expiry date

56. Delivery type

Investment Decision Maker and Executor

57. Investment decision within firm

58. Country of branch responsible for decision maker

59. Execution within firm

60. Country of branch supervising execution

Flags

61. Waiver indicator

62. Short selling indicator

63. OTC post-trade indicator

64. Commodity derivative indicator

65. Securities financing transaction indicator

Furthermore, several other new fields’ & some cases modified will be reported using Different types of identifiers, for example:§ Underlying Instrument Code, Instrument Classification

§ Trading Venue, International Securities, Identification Number (ISIN)

§ International Securities, Identification Number (ISIN)

§ Classification of Financial ,Instrument (CFI) and Market Identifier Code (MIC)

And also Investment decision maker and executor new to MiFIR reporting is the identification of the traders or algorithms involved in the decision and execution process of a transaction. Seriously, reconciliation controls need to be set up to ensure all this data remains accurate and consistent

Short selling indicator: Used to indicate a short sell where the seller is the reporting firm or its client. Also indicates whether the short sale was undertaken under an exemption from disclosure obligations as defined by the Short Selling Regulation (SSR)or

· SESH : Short sale with no exemption

· SSEX :Short sale with exemption

· NC :Benchmark transactions

· ACTX :Agency cross transactions

· NPFT :Non-price forming transactions

· LRGS :Post-trade large-in-scale transactions

· ILQD :Illiquid instrument transaction

· SIZE :Above specific size transaction

· CANC :Cancellations

· AMND :Amendments

· SDIV :Special dividend transactions

· RFPT :Reference price transactions

· NLIQ :Negotiated transactions in liquid financial instruments

· OILQ :Negotiated transactions in illiquid financial instruments

· PRIC :Negotiated transactions subject to conditions other

· than the current market price

· ALGO -Algorithmic transactions

· RPRI -Transactions which have received price improvement

· DUPL -Duplicative trade reports

· TNCP -Transactions not contributing to the price discovery

· process

· T PA-Package transaction

· XFPH -Exchange for physical transaction

Reference Data standards

In the buyer and seller fields, Buyers and sellers can either be reported as legal entities (i.e. investment firms or legal persons), or natural persons. As above, where the buyer or seller is a legal entity, they need to be identified using an LEI, which needs to be reconciled against the global LEI database before engaging in any reportable transactions. This is particularly important when an investment firm is trading on behalf of its clients, as the firm will need to collect and verify the LEIs provided by its clients in advance of any trading. Where the buyer or seller is a natural person, their first name, surname and date of birth are required in the report. Firms will need to gather and normalise this information from HR databases, before compiling transaction reports. To ensure best practice, they should also reconcile any responses from the reporting venues to make sure the data is accurate. Additionally, under MiFIR, firms will need to identify the person or entity that made the decision to buy or sell the instrument in the first place. This will require considerable work to record the relevant data in front-end systems, and then robust data controls to ensure it remains accurate throughout the lifecycle of the trade. Whether an individual or a group of people make the decision to trade, the firm must report the one person considered to have primary responsibility for the transaction. This person needs to be identified by their ID number, passport number, tax or national insurance number depending on their nationality. Or, in the absence of these, by a concatenated code consisting ++

The main executor of the transaction must also be identified – using the same system. Where the decision to trade, or the execution of a transaction, is carried out by an algorithm, that algorithm must be identified using a unique, consistent and persistent code. This enables regulators to track all transactions carried out under a particular strategy, and also ties in with other areas of MiFID II which stipulate that firms must have controls in place to ensure the auditability and resilience of their algorithms. These extra identifiers will require new data to be captured at the point of execution, and then passed to middle and back office

Systems to ensure consistency of reporting

What is the penalty for transaction reporting non-compliance, it has increased since 1st Regime. While the delay to MiFID II and MiFIR’s implementation date may seem like a blessing, it could well make regulators less inclined to forgive early mistakes

Transmission of orders – implications for buy-side - Typical Sample Solution Scenario

Transmission of orders – implications for buy-side : Basic trading scenarios (D1 to D7 -T 1 to T3) scenarios will be explained in next blog article, Note these example are simple capital market product buyer side scenarios and nothing SHOULD be linked to any organisation or company . These examples are purely my own production form training and study and research ongoing on this topic.

1. Front Office <Removed - to be updated later >

2. Middle office for DMS settlements

3. Data Mart / Reporting

4. Reporting engine communication/ Real time ASP, Key stroke synchronism correspond to operational AREA status and Conf of Business partner/ references data

5. Exception Pre- Reporting. -traded obligation between staging data mart before transmission to avoid failure, major validation area

6. Pre-sumission validation results (Key validation here for each and every transaction rules probably might be aligned to ARM before MIFR ARAM

6a Actual submission in destination format accepted in the ARM solution

Above diagram do not goes into Pre traded validations which are unique to individual organisation trading infra.

Reference Data standards

Financial Instruments in scope at High Level in MiFIR II

Financial Instruments in scope at High Level in Scope

Annex 1, Section C . Financial Instruments in scope

o Transferable securities;

o Money-market instruments;

o Units in collective investment undertakings;

o Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash;

o Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);

o Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF;

o Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in C.6 and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls;

o Derivative instruments for the transfer of credit risk;

o Financial contracts for differences.

o Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Section, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls.

Identification of organisations

The Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code, to uniquely identify legally distinct entities that engage in financial transactions. LEIs are issued by "Local Operating Units" (LOUs) of the Global LEI System (there is procedure given how to achieve LSE if there is not yet obtained) , let me know if need anyone information on this . The entity entrusted with the task to coordinate and oversee a worldwide framework for the Global LEI System is the Regulatory Oversight Committee (ROC) being a group of over 60 public authorities from more than 40 countries. The ROC was established in January 2013 as a stand-alone committee after recommendations by the international Financial Stability Board (FSB) and endorsement of the ROC Charter by the Group of Twenty (G-20) nations in November 2012.

The system is intended, in particular, to allow for financial transactions' monitoring on a global, cross-border basis. In the MIFIRs, The institution of LEI Registration Agent has also been introduced. This facility enables trading venues and systematic internalisers to assist the issuer applying for the LEI to access the network of LEI issuing organizations.

LEI under MiFID II/MiFIR in concept of Trading venues

Trading venues: Under the new regulations, any instrument considered to be “liquid” must be traded on an approved venue, which can be a regulated market (RM), multilateral trading facility (MTF), or in the case of OTC transactions, an organised trading facility (OTF).There is ongoing debate and controversy as to what exactly constitutes whether an instrument is “liquid” or “illiquid”. Under MiFIR, all liquid instruments will have to be traded on an exchange, and will also be subject to far greater pre- and post-trade transparency requirements. Whether a particular product is classified as liquid or illiquid could therefore have a big effect on market making.The issue with making this distinction across so many different instruments is one of the main reasons why the MiFID II and MiFIR implementation date has been delayed twice from its original start date of January 2015.

Note: The Executing Entity ID Code and Submitting Entity ID Code are both new fields and need to be defined using a legal entity identifier (LEI). These LEIs will need to be validated against the global database, currently maintained by the Legal Entity Identifier Regulatory Oversight Committee (LEI RO

There is an expectation that the Global LEI database maintained by the Central Operating Unit of the Global LEI System will be available and fully operative before the obligation to report transactions under MiFIR II starts. Further: Identification of individuals’ field by field analysis and Systems & Controls over transaction reporting. see detail Transaction Reporting User Pack (TRUP) here : https://www.fca.org.uk/publication/finalised-guidance/fsa-fg12-07.

Hhere: https://www.fca.org.uk/publication/finalised-guidance/fsa-fg12-07.

Identification of organisations

Transmission of order – implications for buy-side

Legal obligation for firms to deliver complete and accurate transaction reports and my favourite topic area of Reconciliation are legally enumerated in Section C of MiFID Directive supplemented by Articles 38 and 39 of the Regulation (EC) No 1287/2006 of 10 August 2006 implementing Directive 2004/39/EC,

Transmission of order – implications for buy-side
Basic trading scenarios (TBD)
Reference Data standards

Instrument and underlying instrument identifiers in scope of (MiFID), as per Annex 1, Section C . Financial Instruments

Transmission of order – implications for buy-side
Legal obligation for firms to deliver complete and accurate transaction reports and my favourite topic area of Reconciliation

To be detailed is next is Blog Article, We will have detail typical solution article/ Blog View), I will decompose in detail step by step guide (anyone interested please visit our blog.

MiFID2/MiFIR: what, when, who and how

Disclaimers:

All the information on this topic is published for general information purpose only and further to be noted, this material is completely production of authors’ own research contents / material collected from various websites, conference and workshops in a close groups such as Meetup, online webinars, training video, elexica etc. I do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information is strictly at your own risk. and we will not be liable for any losses and damages in connection with the use of our information. Please be also aware that when you our external hosted blogs, other site may have different privacy policies and terms which are beyond my/our control. From our website/Blog, Topic you can visit other websites by following hyperlinks to these sites. While we strive to provide only links to useful and ethical websites, we have no control over the content and nature of these sites and the links to other websites do not imply a recommendation for all the content found on these sites. Please be also aware that when you leave our Blog, topic website, and other sites may have different privacy policies and terms which are beyond my/our control.

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MiFID2/MiFIR: what, when, who and how

On 3 January 2018, Europe will see the update to the Markets in Financial Instrument Directive (MiFID II) and the accompanying Regulation (MiFIR) come into force. Focusing on core principles of the creation of fairer, safer and more efficient markets, this arguably is the broadest piece of financial industry legislation ever and has the potential to significantly change market structures. Now is the time to be selecting and integrating systematic solutions , depending on your banks business model, it is affecting a wide range of your banks, financial firm’s functions – from trading, transaction reporting and client services to IT and HR systems.

WHAT is the KEY CHANGE in MIFID 1 - the concept of multilateral trading facilities (“MTFs”) and “systematic in sternalisers” (“SIs”) and imposed pre- and post - trade transparency the SIs market makers-matching customer orders internally rather than showing these to the market. Mifid replaces rules in many markets that require trades to be executed at local exchanges. Instead, banks will be allowed to act as "systematic internalisers",

WHY

So why need MIFID 2, is it extension to MIFID 1 , The MiFID one was to strengthen the single market for investment services and activities, thereby harmonising investor protection and increasing competition in EU financial markets. Many of these aims were achieved, such as allowing trading venues and investment firms to operate across the EU. However, technological development, the increasing complexity of both products and services and the flaws highlighted by the financial crisis led the European Commission to suggest a significant number of revisions to the initial directive in its consultation of 8th December 2010. The result of this consultation and review is the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID II”) . In simple under the MIFID 2 is government is not seeking to make fundamental changes to its structure, but to work within the existing framework. The UK Government believes that this is consistent with minimising the Primary amendments to FSMA and related statutory instrument under MiFID II.

In the UK Government has Designates the FCA, PRA and the Bank of England as competent authorities for the purposes of MiFID II and MiFIR (I will explain in next section) . In UK the FCA will be principally responsible for supervision of compliance with MiFID II and MiFIR, but it is not 0nly affects the organisational requirements of a number of the banks and all of the major investment firms supervised by the PRA but also touches on CCPs who are authorised and supervised by the Bank of England.

In next section, I will have more details on the instrument under MIfIR compliance. Buyer side and seller side rules and what is the pre-trade and post transparency and any waivers.

WHAT is the KEY CHANGE in MIFID 1 - the concept of multilateral trading facilities (“MTFs”) and “systematic in sternalisers” (“SIs”) and imposed pre- and post - trade transparency the SIs market makers-matching customer orders internally rather than showing these to the market. Mifid replaces rules in many markets that require trades to be executed at local exchanges. Instead, banks will be allowed to act as "systematic internalisers", So why need MIFID 2, is it extension to MIFID 1 , The MiFID one was to strengthen the single market for investment services and activities, thereby harmonising investor protection and increasing competition in EU financial markets. Many of these aims were achieved, such as allowing trading venues and investment firms to operate across the EU. However, technological development, the increasing complexity of both products and services and the flaws highlighted by the financial crisis led the European Commission to suggest a significant number of revisions to the initial directive in its consultation of 8th December 2010. The result of this consultation and review is the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID II”) . In simple under the MIFID 2 is government is not seeking to make fundamental changes to its structure, but to work within the existing framework. The UK Government believes that this is consistent with minimising the Primary amendments to FSMA and related statutory instrument under MiFID II.

In the UK Government has Designates the FCA, PRA and the Bank of England as competent authorities for the purposes of MiFID II and MiFIR (I will explain in next section)

In UK the FCA will be principally responsible for supervision of compliance with MiFID II and MiFIR, but it affects the organisational requirements of a number of the banks and all of the major investment firms supervised by the PRA and touches on CCPs who are authorised and supervised by the Bank of England.

In next article, I will have more details on the instrument under MIfIR compliance. Buyer side and seller side rules and what is the pre-trade and post transparency and any waivers.

IN NEXT 2 ARTICLE, I will outline following:

· Headline changes to the Buy-Side Reporting, Off course, I will also touch upon Top Consulting (top 5Cs) view along and the readiness of the Off the shelf solution or system providers in readiness for Pre and post transaction such as UnaVista, bloomberg the LSE London Stock Exchange Group's global hosted platform for all matching, validation and reconciliation needs. What is required to be complaint in MIFIR II reporting which was not there in MIFIR 1

The number of data fields required on transaction reports is more than doubling from 24 to 65. In addition, many of the existing fields required by MiFID I will be amended to encompass more complexity and a greater breadth of instruments.

There follows a summary of the reporting requirements, and some of the internal and third-party systems that firms will

need to source the new data from.

What is Clock Synchronisation which might sounds easy, but could amount to Major IT task, the same as reporting requirements and transparency regulations.

Transaction Reporting Basics, Definition of execution of a transaction, transaction reporting User Pack (TRUP). it can be located here : https://www.fca.org.uk/publication/finalised-guidance/fsa-fg12-07.

Transmission of order – implications for buy-side. Reporting exemptions and Re-portable instruments Key Principals of the trading Capacity and impact on ‘buyer’/’seller’ fields and validation rules and the Annex II- Data validation rules for transaction reporting - ESMA.Detail Rules can be located here : https://www.esma.europa.eu/sites/default/files/library/validation_rules.xlsx

Financial instruments are legally enumerated in Section C of MiFID Directive supplemented by Articles 38 and 39 of the Regulation (EC) No 1287/2006 of 10 August 2006 implementing Directive 2004/39/EC. Listed below

Instrument and underlying instrument identifiers, Markets in Financial Instruments Directive (MiFID), The list of financial instruments covered has been extended to almost all instruments traded in European markets – with particular emphasis on the OTC derivatives market that was previously out of scope for MiFID I. The only financial instruments that still fall outside MiFIR’s . Not in scope are: Segregated collateral transfers in bilateral transactions (though the exact details of this are still being worked out).+ Financing transactions already covered under the Securities Financing Transaction Regulation (SFTR).+ Give-ups or give-ins of the The issuance, allotment, subscription or exercise of pre-emption rights.

Sunday, 7 May 2017

8 Months left to GO in MFIIF/MFIR implementation --MiFID Directive and accompanying regulation (MiFIR) regulatory change in EU/UK

Interestingly question about how to prepare for the MiFID Directive and accompanying regulation (MiFIR) regulatory change, I think it is half way through answering in financial industry.

As well known the financial crisis in 2008, European policymakers began to review and update the Markets in Financial Instruments Directive (MiFID I), and accompanying regulation (MiFIR), seeking to increase market stability and confidence, and bolster consumer protections. The MiFID II directive applies to financial industry players that operate and or do business with European firms providing investment services but if the UK banks directly do not directly do business with European firms, does it apply, apparently yes, because regulation says The Markets in Financial Instruments Directive regulates firms who provide services to clients linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded, hence it is clear that not the country or localisation but the financial instruments and trading venues are under Directive regulation and also provide more resilient, transparent and investor-friendly and is part of a number of measures enacted in response to the financial crisis. These include the European Markets Infrastructure Regulation (EMIR), which seeks to make the EU’s OTC derivative market safer, and the Securities Transactions Regulation (SFTR) which seeks to regulate the EU’s shadow-banking sector.

On 3 January 2018, Europe will see the update to the Markets in Financial Instrument Directive (MiFID II) and the accompanying Regulation (MiFIR) come into force. Focusing on core principles of the creation of fairer, safer and more efficient markets, this arguably is the broadest piece of financial industry legislation ever and has the potential to significantly change market structures.

Now is the time to be selecting and integrating systematic solutions , depending on your banks business model, it is affecting a wide range of your banks, financial firm’s functions – from trading, transaction reporting and client services to IT and HR systems.

Let’s review bits and pieces of the Financial Instruments Directive (MiFID), and accompanying regulation (MiFIR)

I will not go into detail of MIFIR here but need to understand why need MiFID II if there is MifID I, the original Markets in Financial Instruments Directive (MiFID - One) lead to a major shift in the cash equity markets.... It was required to remove barriers to cross-border financial services within Europe union for a safer, more transparent and evenly balanced marketplace as a whole.

The MiFID 1 Directive (2004/39/EC) (“MiFID”) was a significant development in the regulatory architecture of the EU.

It replaced the Investment Services Directive (93/22/EEC) (“ISD”), establishing a new regulatory regime for securities and derivatives introduced, for example, the concept of multilateral trading facilities (“MTFs”) and “systematic in sternalisers” (“SIs”) and imposed pre- and post - trade transparency on these entities (in certain cases) and others. MiFID was agreed in 2004 as a level 1 or framework directive, which followed the Lamfalussy process (a four- level approach to the production and implementation of EU single financial services market legislation).

The level 1 directive applied from 1November 2007 and is supplemented by the following level 2 legislation, adopted by the European Commission (“Commission”) in August 2006: the Commission Directive 2006/73/EC (“MiFID Implementing Directive”), which deals predominantly with the organisational and conduct requirements for investment firms Commission Regulation 1287/2006/EC (“MiFID Implementing Regulation”), which sets out a number of the details regarding the MiFID secondary markets regime.

So why need MIFID 2, is it extension to MIFID 1 , The MiFID one was to strengthen the single market for investment services and activities, thereby harmonising investor protection and increasing competition in EU financial markets. Many of these aims were achieved, such as allowing trading venues and investment firms to operate across the EU. However, technological development, the increasing complexity of both products and services and the flaws highlighted by the financial crisis led the European Commission to suggest a significant number of revisions to the initial directive in its consultation of 8th December 2010.

The result of this consultation and review is the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID II”) . In simple under the MIFID 2 is government is not seeking to make fundamental changes to its structure, but to work within the existing framework. The UK Government believes that this is consistent with minimising the Primary amendments to FSMA and related statutory instrument under MiFID II.

In next section, I will have more details on the instrument under MIfIR compliance. Buyer side and seller side rules and what is the pre-trade and post transparency and any waivers.

Perfect opportunity to understand what the ESMA is and the FCA thinks on the implementation, please see our upcoming event on Meetup.com...that will discussed under following:

· Headline changes to the Buy-Side Reporting, Off course, I will also touch upon Top Consulting (top 5Cs) view along and the readiness of the Off the shelf solution or system providers in readiness for Pre and post transaction such as UnaVista, Bloomberg the LSE London Stock Exchange Group's global hosted platforms for all matching, validation and reconciliation needs.

What is Clock Synchronisation which might sounds easy, but could amount to major IT task, the same as reporting requirements and transparency regulations.

Transaction Reporting Basics, Definition of execution of a transaction, transaction Reporting User Pack (TRUP). it can be located here : https://www.fca.org.uk/publication/finalised-guidance/fsa-fg12-07. Transmission of order – implications for buy-side

Reporting exemptions and Re-portable instruments Key Principals of the trading Capacity and impact on ‘buyer’/’seller’ fields and validation rules and the Annex II- Data validation rules for transaction reporting - ESMA. Rules can be located here www.esma.europa.eu/sites/default/files/library/validation_rules.xlsx

Let’s review bits and pieces of the Financial Instruments Directive (MiFID), and accompanying regulation (MiFIR)

MiFID is a Directive meant, A DIRECTIVE is an official or authoritative instruction that involves the management or guidance of operations so it is instructions of management operation. So while the directive needs to be implemented by the local financial services authorities in each of the EU country while the MiFIR is European law, the LAW is or the system of rules which a particular country or community, or operational authorities for common objectives recognizes as regulating the actions of its members and which it may enforce by the imposition of penalties and member states need to comply with the new regulation. From above it is clear, More Strict is the MIFIR. the Financial Instruments Regulation (MiFIR) reporting is one of the MiFID theme. Key aspects are the pre-trade transparency and Pre-trade transparency. We will not go into detail of MIFIR here but need to understand why need MiFID II if there is MifID one, the original Markets in Financial Instruments Directive (MiFID - One) lead to a major shift in the cash equity markets.... It was required to remove barriers to cross-border financial services within Europe union for a safer, more transparent and evenly balanced marketplace as a whole.

The MiFID 1 Directive (2004/39/EC) (“MiFID”) was a significant development in the regulatory architecture of the EU. It replaced the Investment Services Directive (93/22/EEC) (“ISD”), establishing a new regulatory regime for securities and derivatives introduced, for example, the concept of multilateral trading facilities (“MTFs”) and “systematic in sternalisers” (“SIs”) and imposed pre- and post - trade transparency on these entities (in certain cases) and others. MiFID was agreed in 2004 as a level 1 or framework directive, which followed the Lamfalussy process (a four- level approach to the production and implementation of EU single financial services market legislation). The level 1 directive applied from 1November 2007 and is supplemented by the following level 2 legislation, adopted by the European Commission (“Commission”) in August 2006: the Commission Directive 2006/73/EC (“MiFID Implementing Directive”), which deals predominantly with the organisational and conduct requirements for investment firms Commission Regulation 1287/2006/EC (“MiFID Implementing Regulation”), which sets out a number of the details regarding the MiFID secondary markets regime.

WHAT is the KEY CHANGE in MIFID 1 - the concept of multilateral trading facilities (“MTFs”) and “systematic in sternalisers” (“SIs”) and imposed pre- and post - trade transparency the SIs market makers-matching customer orders internally rather than showing these to the market. Mifid replaces rules in many markets that require trades to be executed at local exchanges. Instead, banks will be allowed to act as "systematic internalisers", So why need MIFID 2, is it extension to MIFID 1 ,

The MiFID one was to strengthen the single market for investment services and activities, thereby harmonising investor protection and increasing competition in EU financial markets. Many of these aims were achieved, such as allowing trading venues and investment firms to operate across the EU. However, technological development, the increasing complexity of both products and services and the flaws highlighted by the financial crisis led the European Commission to suggest a significant number of revisions to the initial directive in its consultation of 8th December 2010. The result of this consultation and review is the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID II”) . In simple under the MIFID 2 is government is not seeking to make fundamental changes to its structure, but to work within the existing framework. The UK Government believes that this is consistent with minimising the Primary amendments to FSMA and related statutory instrument under MiFID II.

In the UK Government has Designates the FCA, PRA and the Bank of England as competent authorities for the purposes of MiFID II and MiFIR (I will explain in next section)

In next article, I will have more details on the instrument under MIfIR compliance. Buyer side and seller side rules and what is the pre-trade and post transparency and any waivers.

IN NEXT 2 ARTICLE, TO BE POSTED ON OUR COMMON BLOG WILL outline following:

What is Clock Synchronisation which might sounds easy, but could amount to major IT task, the same as reporting requirements and transparency regulations.

Instrument and underlying instrument identifiers, Markets in Financial Instruments Directive (MiFID)

Annex 1, Section C . Financial Instruments

o Transferable securities;

o Money-market instruments;

o Units in collective investment undertakings;

o Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF;

o Derivative instruments for the transfer of credit risk;

o Financial contracts for differences.

Identification of organisations

LEI under MiFID II/MiFIR

Further :Identification of individuals field by field analysis and Systems & Controls over transaction reporting. see detail Transaction Reporting User Pack (TRUP) here : https://www.fca.org.uk/publication/finalised-guidance/fsa-fg12-07.

here: https://www.fca.org.uk/publication/finalised-guidance/fsa-fg12-07.

Identification of organisations

Transmission of order – implications for buy-side

Transmission of order – implications for buy-side
Basic trading scenarios (TBD)
Reference Data standards

Instrument and underlying instrument identifiers in scope of (MiFID), as per Annex 1, Section C . Financial Instruments

o Transferable securities;

o Money-market instruments;

o Units in collective investment undertakings;

o Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF;

o Derivative instruments for the transfer of credit risk;

o Financial contracts for differences.

Transmission of order – implications for buy-side
Legal obligation for firms to deliver complete and accurate transaction reports and my favourite topic area of Reconciliation

To be detailed is next is ..

Transmission of order – implications for buy-side
Basic trading scenarios (TBD)

Reference Data standards