04 June 2012

EBF final comments on ESMA call for evidence on transaction reporting

Concerning the detention of potentially abusive behaviours and practices, the EBF believes that high quality data is of the essence. This is important to ensure that national regulators can share and understand the data for their investigations. Unfortunately, this call for evidence does not reveal details of ESMA’s mapping exercise on common transaction schemes. Before decisions can be taken, a proper assessment of suitable standards and protocols is indispensable. The EBF therefore calls on ESMA to take the time necessary to examine the markets and to consult market participants comprehensively.

The current review of the Markets in Financial Instruments Directive (MiFID II) proposes to introduce several changes on transaction reporting. Most importantly, transaction reporting provisions will no longer be mandated by way of a Directive but through a Regulation which would lead to a high degree of harmonisation. If ESMA published new guidelines on transaction reporting with the intention of covering the transition between MiFID and MiFID II, it may create unnecessary extra regulatory costs for European banks that decide to comply with them.

Furthermore, the EBF calls on ESMA to avoid duplication of reporting when preparing technical standards on transaction reporting. For this purpose, reporting firms should have the option for their trades in derivatives reported to a trade repository to satisfy their transaction reporting obligations, and should not be required to report the same information again to the competent authority. Whilst current drafts of MiFID II contain provisions to this effect, EBF would recommend considering how early adoption of these or similar provisions can be coordinated to coincide with the implementation of EMIR. The competent authority should therefore have access to trade repositories’ data.

The EBF is of the view that a clear definition of “transaction” is needed. The definition should include what constitutes an execution, receipt and transmission of an order so as to ensure accurate and useful data is sent to the competent authority. The review of MiFID does not include a definition of “transaction” in Level 1, and Member States define it differently within their jurisdictions, thereby creating compliance burdens for firms operating in more than one Member State.

Finally, other aspects that ESMA may consider on transaction reporting are: (i) the use of global accepted conventions in order to remove local time adjustments; (ii) the use of instruments identifiers; (iii) once developed, legal entity identifiers; and (iv) the use of a common language such as XBRL.

Full letter

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