07 April 2016

ESMA publishes responses to the Consultation on Guidelines on transaction reporting, reference data, order record keeping and clock synchron

AFME

In relation to Trading Capacity and Short Selling fields interaction when executing in a riskless principal (RP) capacity, AFME requests the removal of paragraph 1.3.5.1 on page 90 of the ESMA CP. AFME argues that it leaves little room to consider, when executing a sale in to the market, whether this is being performed on behalf of a client or not. Its removal would mean leaving AFME members with scope to make their own determination from a legal and, if relevant, regulatory perspective, whether the actual activity they are undertaking amounts to a short sale for the purposes of the SSR, notwithstanding the Trading Capacity specified in the TR.

Full response

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Deutsche Bank

Whilst Deutsche Bank agrees that the transaction reports from parties to the same transaction should contain the same details, their understanding is that there are no ‘matching requirements’ similar to EMIR under MiFID II. Deutsche Bank would appreciate a clear statement to that effect.

Deutsche Bank would also like to raise the prospect of inconsistent interpretations if a definition of “client” is not set by ESMA. If different jurisdictions apply their own definitions of the level of client that should be identified in a report, it is entirely possible that reports submitted to the BaFin (for example) by an investment firm will identify the fund as the client and be at the sizes/prices agreed per allocation for settlement, whilst the report submitted to the FCA (for example) by the client will be at the size and price of the block trade.

Full response

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The European Association of Co-operative Banks (EACB)

The EACB would be strongly against the proposed reporting requirement for SFTs between credit institutions and central banks. This approach totally disregards recital 12 of Regulation (EU) 2015/2365 on transparency of securities financing transactions and of reuse (SFTR) which provides that members of the European System of Central Banks (ESCB) should be exempted from the obligation to report any securities financing transactions to trade repositories. For this reason, SFT not reporting under SFTR should also not be reported under Art. 26 MiFIR.

The EACB would like to clarify whether units of investment funds are to be considered as reportable instruments when a market participant that is not the administrator of the fund (e.g. a broker) lists the fund on a trading venue (i.e. the administrator of the funds does not list the fund on a trading venue.

Full respone

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European Banking Federation (EBF)

As EBF points out, the area for obtaining information from the reference database is not covered in the proposed guidelines but is of great importance for the industry. ESMA is building a reference database of information for all financial instruments where transactions should be reported to the National Competent Authority. To EBF’s understanding it will be possible for investment firms to use the database for the collection of data in financial instruments where transactions are to be reported. It is highly desirable that reporting based on this data is a safe harbour. That is, if the investment firm has relied on the reference database and the data in it, then it has also fulfilled the obligation to obtain information of the financial instruments to be reported. For the Investment firm submitting information to the database it is not clear how this should be done. It is desirable that the obligation and conditions are clarified as soon as possible. Normally the obligation to submit information to the reference database should only apply when new or changed information is available. It is also desirable that the database contains information of which firms are systematic internalisers and in which financial instruments, making it possible to publish post trade data in a correct way.

Full response

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Euronext

As one of its main concerns on the publication of reference data by ESMA, Euronext highlighted the following:  In some countries, the infrastructure in charge of the production and distribution of reference data is distinct from the one running the Exchange. In those cases, the revenue streams of that independent and separate infrastructure rely solely on license and distribution fees for the reference data it collects, cleans, and maintains in a database. These databases are quite costly to build and maintain due to the scope of information required.

In parallel, many trading venues maintain up-to-date instrument reference databases both for regulatory purposes and as an additional service provided to clients. On the clients’ side, key business operations are reliant on reference data to function properly, e.g. trade confirmation systems, systems checks, or internal IT systems to track trades. Typically, these operations do not require real-time data and trading venues provide low-fee options to access the necessary data, such as FTP downloads from a server.

Should ESMA make the entire MIFID II reference database publicly available for free, the business case for running that type of services would be seriously undermined. We strongly question the rationale for that, given that no market failure has been evidenced in this area. This makes it all the more important for ESMA to strictly respect its publication mandate and publish only the reference data that is necessary to identify instruments for the purpose of transaction reporting.

Full response

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