London Stock Exchange. TRADEcho MiFID II Deployment Guide

Transcription

1 London Stock Exchange TRADEcho MiFID II Deployment Guide Issue October 2017

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3 Contents 1.0 Purpose Document History References to MiFIR / MiFID II documentation published by London Stock Exchange Key Dates Deployment Approach Initial Connectivity TRADEcho Phase 1 Deferred Publication Trade Reports New Segment MICs TRADEcho Phase 2 Deferred Publication Regime Interim replacement of Reporting Condition in Guidance to Rule Cancelling Phase 1 trades Phase 1 database Extension of OTC & SI trade reporting period Move of securities on trading segments ITR, AIM and AIMI to SETSqx All FTSE 100 securities to be included in segment SET Introduction of London Stock Exchange closing prices for trading segment EQS Summary Table Deployment Approach 15

4 Disclaimer The London Stock Exchange Group has taken reasonable efforts to ensure that the information contained in this publication is correct at the time of going to press, but shall not be liable for decisions made in reliance on it. The London Stock Exchange Group will endeavour to provide notice to customers of changes being made to this document, but this notice cannot be guaranteed. Therefore, please note that this publication may be updated at any time. The information contained is therefore for guidance only. October London Stock Exchange Group plc, 10 Paternoster Square, London EC4M 7LS.

5 1.0 Purpose In view of the regulatory changes introduced by the revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), London Stock Exchange will adapt its Rules, trading systems and exchange services between November 2017 and January 2018, with the goal of ensuring: (i) an orderly migration to the new versions of its systems, and (ii) a proper management of the transition between the current and the new regulatory regime. The objective of this document is to present: the roadmap of the deployment plan for TRADEcho, London Stock Exchange s off book trade reporting system for on Exchange, OTC and SI executions; an opportunity for member firms and other market participants to provide feedback on this proposed approach; It should be read in conjunction with the following documents: DRAFT MIT201 Guide to the Trading System DRAFT MiFID II Millennium Exchange & TRADEcho Business Parameters MiFID II Deployment Guide Proposal This is the 2 nd issue of this document edition, please see section 2.0 for overview of amendments and additions. Any feedback by market participants should be made to the following contacts: Compliance o +44 (0) o RulesAndComplianceTeam@londonstockexchange.com Technical Account Management o o londontam@lseg.com Trading Services o o clients@lseg.com 5

6 We will publish additional information and, if necessary, amendments to this approach in due course. Time in London is referred to throughout. A summary table of the approach is provided at the end of this document. 2.0 Document History Issue Date Description September 2017 Publication of initial version October 2017 Slight revision sections 5.2 & 5.4 New sections 5.9, 5.10 & 5.11 Updated sections 4.0 & References to MiFIR / MiFID II documentation published by London Stock Exchange The following documents are complementary to this communication. Additional documents related to our adaptation program to MiFIR / MiFID II will be published in due course. Regulatory documents Stock Exchange Notice N06/17 was issued on 31 July 2017 and provided the proposed amended Rules of the London Stock Exchange ( the Rules ) in preparation for MiFIR / MiFID II, the Notice and the Rules can be found here: Technical documents For updated technical documents regarding TRADEcho Phase 2 please refer to: For updated technical documentation regarding GTP services, please refer to: 6

7 4.0 Key Dates The key dates for the migration plan to the new versions of TRADEcho are as follows: Current version TRADEcho Phase 1 New version TRADEcho Phase 2 Customer Dress Rehearsals 28 October & 11 November 2017 Technical Go-live 20 November 2017 In order to ensure a proper management of the transition between the current and the new regulatory regime, TRADEcho Phase 2 will be deployed in production in advance of the legal entry into force of MiFIR / MiFID II on Wednesday 3 January Market participants are informed that: The deployment of TRADEcho Phase 2 will require a significant update of the structure of trading and market data protocols, in order to handle the additional information required by specific MiFIR / MiFID II provisions and related Technical Standards. The new structure of these protocols will be deployed in production alongside the MIT Exchange 9.2 changes from the Technical Go-live date, as detailed in the table above; Market participants will be required to conform to these new versions of trading and market data protocols in advance of any customer dress rehearsal (as required by London Stock Exchange s Conformance Test policy 1 ), and to properly handle new information required by incoming/outgoing technical messages; At the Technical Go-live date, TRADEcho will switch to its post MiFIR / MiFID II structure. However there will be a number of configuration amendments ( Interim Configuration ) to allow trading participants to continue to meet their MiFID I obligations until they are replaced by MiFID II; and It is planned that the 3 January 2018 MiFID II configuration will be in place on TRADEcho CDS until 20 October 2017 and then again from week commencing 20 November It will also be in place for the Customer Dress Rehearsals. The Interim Configuration will be available on CDS for a 4 week period from 23 October As available at the following link: 7

8 5.0 Deployment Approach 5.1 Initial Connectivity TRADEcho will enter the Open session from 06:15 on Technical Go-live date to allow customers an extra hour to establish initial connectivity. Customers should log in using their default password and change the password on first logon, as all login and trade details from TRADEcho Phase1 will not carry across. Whilst trades will also publish from 06:15 on this day, there is no requirement for a member firm to enter trade reports before 07:15 as normal. From the day following Technical Go-live date, the TRADEcho Open session will revert to the normal start time of 07: TRADEcho Phase 1 Deferred Publication Trade Reports From Wednesday before Technical Go-live onwards, the maximum scheduled delay will be reduced so that no TRADEcho Phase 1 trade will be permitted a delay later than the end of trading on the Friday before Technical Go-live. Consequently, any remaining deferred trades will publish at 17:15 on Friday before Technical Go-live. Customers who wish to carry forward deferred publication trade reports from Phase 1 to Phase 2 are required to cancel the relevant trade report themselves from Phase 1 prior to 17:15 on the Friday before Technical Go live and then re-enter into Phase 2 from 06:15 onwards on Technical Go-live. Please note on re-entry into Phase 2, the remaining delay applied will be as per the Interim Configuration (see below). 5.3 New Segment MICs From Technical Go-live date the London Stock Exchange Regulated Market and MTF business will have different MIC codes, as follows: XLON for Regulated Market on Exchange trading AIMX for AIM MTF on Exchange trading XLOM for Non-AIM MTF on Exchange trading. For more details see the Service Announcement issued 11 August 2017: 8

9 5.4 TRADEcho Phase 2 Deferred Publication Regime Unlike Phase 1 which is driven by trading segment, Phase 2 uses the instrument s Mifir Identifier to determine which delay regime should be applied. From Technical Go-live date the following Mifir Identifiers will adopt the final MiFID II configuration: ETFS CRFT OTHR Interim Configuration SHRS and DPRS will adopt a modified delay regime for the Interim Configuration period. This will ensure that equity trades continue to get a delay no more generous than permitted under MiFID 1. It is not possible to recreate the full MiFID 1 delay regime so in some cases trades will no longer benefit from the full MiFID1 delay during the Interim Configuration period. This is due to Phase 2 being based on the broad structural approach of the revised regime and no longer being able to support delays beyond the end of second trading day next after trade. Phase 2 Interim Configuration delay regime for SHRS & DPRS from Technical Go-live date for the remainder of 2017 follows on the next page 9

10 Interim Configuration delay regime for SHRS & DPRS from Technical Go-live date for the remainder of 2017 ADT in Minimum qualifying size on transaction in Timing of publication > 100m 50m -100m 25m - 50m 5m - 25m 1m - 5m 500,000-1m 100, ,000 50, ,000 < 50,000 7,500, Mins 15,000, Mins 30,000,000 End of trading Day N/A End of the next trading Day N/A End of second trading day next after trade 7,500, Mins 15,000, Mins 30,000,000 End of trading Day 100,000,000 End of the next trading Day 250,000,000 End of second trading day next after trade 3,500, Mins 5,000, Mins 10,000,000 End of trading Day 25,000,000 End of the next trading Day 50,000,000 End of second trading day next after trade 2,500, Mins 3,750, Mins 6,250,000 End of trading Day 12,500,000 End of the next trading Day 25,000,000 End of second trading day next after trade 500, Mins 750, Mins 1,250,000 End of trading Day 2,500,000 End of the next trading Day 5,000,000 End of second trading day next after trade 50, Mins 150, Mins 250,000 End of trading Day 500,000 End of the next trading Day 1,000,000 End of second trading day next after trade 25, Mins 75, Mins 125,000 End of trading Day 250,000 End of the next trading Day 500,000 End of second trading day next after trade 10, Mins 25, Mins 45,000 End of trading Day 60,000 End of the next trading Day 80,000 End of second trading day next after trade 10, Mins 25, Mins 45,000 End of trading Day 60,000 End of the next trading Day 80,000 End of second trading day next after trade 10

11 Non-equity Interim Configuration From Technical Go live date for the rest of 2017 the existing LSE delay regime in place for nonequity will be revised. The delay will be driven by the TAG NotionalAmount a required field to be entered by the trading participant for non-equity. Phase 2 Interim configuration delay regime for Non-equity from Technical Go-live date for the remainder of 2017 Mifir Mifir MiFID II Notional Interim Artificial reference Identifier Subclass functionality Amount configuration changes to security being used Greater than delay required BOND CRPB SSTI 50,000 17:15 T+1 LIQUID, LIS v. high, SSTI = 50k BOND OEPB SSTI 50,000 17:15 T+1 LIQUID, LIS v. high, SSTI = 50k BOND CVDB Non-liquid 0 17:15 T+1 NON-LIQUID BOND CVTB Non-liquid 0 17:15 T+1 NON-LIQUID BOND OTHR Non-liquid 0 17:15 T+1 NON-LIQUID BOND EUSB Large in Scale ALL OTHER NON-EQUITY NONE N/A NONE LIQUID, LIS & SSTI v. high 50,000 No Publication LIQUID, SSTI v high LIS = 50, Interim replacement of Reporting Condition in Guidance to Rule 3040 From Technical Go-Live Date the Reporting Condition (SP marker) will no longer be supported. Up to and including Tuesday 2 January 2018 the MiFID II Flags may be used as follows to replace the use of Reporting Condition as required by the current guidance of Rule 3040 of the Rules. A Stock Exchange Notice will be issued shortly before Technical Go-live date to ensure that the Rules are consistent with the approach set out in this document. Please note that all Negotiated Trades that are subject to conditions other than the current market price, the MiFID II flag PRIC must always be used, regardless of any other additional flag required below. 11

12 Guidance to Rule 3040 Reporting Condition from Technical Go-live date MiFID II flag to be used until 2 January 2018 (i) where the trade is special cum or ex dividend / coupon / rights bonus / capital repayment basis SDIV (ii) where the trade is for guaranteed delivery No flag (iii) where the trade is for non standard settlement No flag (iv) where the trade is executed in reference to a price that is calculated over multiple time instances according to a given benchmark, includes volume-weighted average price or a timeweighted average price trades BENC (v) where the trade is part of a portfolio trade as defined within the Rules TNCP (vi) where the trade is contingent on the purchase, sale, creation or redemption of a derivative contract or other financial instrument where all the components of the trade are meant to be executed as a single lot TNCP (vii) where the trade is executed by a management company as defined in Article 2(1)(b) of Directive 2009/65/EC or an alternative investment fund manager as defined in Article 4(1)(b) of Directive 2011/61/EU which transfers the beneficial ownership of financial instruments from one collective investment undertaking to another and where no investment firm is a party to the transaction TNCP (viii) where the trade is a give-up transaction or a give-in transaction; NPFT (ix) where the trade has as its purpose the transferring of financial 12

13 Guidance to Rule 3040 Reporting Condition from Technical Go-live date MiFID II flag to be used until 2 January 2018 instruments as collateral in bilateral transactions or in the context of a CCP margin or collateral requirements or as part of the default management process of a CCP NPFT (x) where the trade results in the delivery of financial instruments in the context of the exercise of convertible bonds, options, covered TNCP warrants or other similar financial derivative (xi) where the trade is a securities financing transaction TNCP (xii) where the trade is carried out under the rules or procedures of a trading venue, a CCP or a central securities depository to effect buy-in of unsettled transactions in accordance with Regulation (EU) No 909/2014. TNCP 5.6 Cancelling Phase 1 trades Customers wishing to cancel a trade after Technical Go-Live date that was originally entered in Phase 1 will need to do so using the new Phase 2 functionality and message formats. 5.7 Phase 1 database After the Technical Go-Live the TRADEcho WebPortal will no longer contain any Phase 1 trading data. Customers are advised to archive required information prior to this time. Where necessary London Stock Exchange will, on a best endeavour basis, be able to extract a customer s Phase 1 data and provide it on request in EXCEL format. 5.8 Extension of OTC & SI trade reporting period Currently, the submission of trade reports ceases at 17:15. From Tuesday 2 January 2018, this will be extended to 19:15 for OTC and SI trade reports. On Exchange trade reporting submission will continue to end at 17:15, with deferred trades continuing to publish until 19:15. 13

14 5.9 Move of securities on trading segments ITR, AIM and AIMI to SETSqx Currently, there are approx. 3,000 non-ukla, EU regulated Market securities that are classified by ESMA as non-liquid that are available on segment ITR for trade reporting only. These securities will be moved to SETSqx without market makers - segment SSX4, sector SXEL - effective start of trading Monday 11 December This will provide the ability for member firms to provide pre trade transparent executions through the auctions, as well as provide Named Orders at any point of the trading day. Any order book executions will be un-cleared and bilaterally settled by the trading participants concerned. The draft Millennium and TRADEcho Business parameters have been amended to reflect the revised regulatory classification of the above segment /sector combination. For legacy reasons approx. 380 AIM securities remain on SEAQ in trading segments AIM and AIMI. These securities will be moved to SETSqx with market makers effective start of trading Monday 11 December Securities that support auction execution central counterparty clearing will move to segment ASQ1 sector AMQ1. Securities that are not available for clearing will move to segment ASX1 sector AIMP. All 380 securities will continue to have continuous rule based market maker quotes but the move to SETSqx will also meet the MiFID requirement of allowing non executed orders to be added to a public order book. The orders will be visible in the 10 minute period ahead of each auction (5 mins ahead of closing auction). This ties in with the approach adopted for MiFID1 where the remaining Main Market SEAQ securities were moved to SETSqx in There will also ill be some securities changing trading sectors within segments STMM, SSMM and SET3. This will follow the introduction of the liquidly flag at security level making sectorisation on this basis redundant. Full details of all securities moving as part of this exercise will be confirmed as part of the December Quarterly Review Service Announcement that will be issued on Friday 1 December All FTSE 100 securities to be included in segment SET1 Trading segment SET0 was introduced to support the current operation of an accelerated tick regime for approx. 24 FTSE 100 securities. Following the introduction of the revised MiFID II tick regime these securities will be moved back to SET1 with effect from Tuesday 2 January SET0 will become reserved for future use Introduction of London Stock Exchange closing prices for trading segment EQS Currently there are no closing prices disseminated by the European Quoting Service (trading segment EQS), which supports non-ukla, EU regulated Market securities that are classified by ESMA as liquid. Effective from Tuesday 2 January 2018, the mid of the best bid-offer at the end Mandatory Period of the relevant Trading Cycle will be disseminated as the closing price. This will support of the Negotiated Trade regime outside standard trading hours. The draft Millennium and TRADEcho Business Parameters have been amended to reflect this change. 14

15 6.0 Summary Table Deployment Approach On last trading day of TRADEcho Phase 1 (Friday before Technical Go-live) Customers who wish to carry forward deferred publication trade reports from Phase 1 to Phase 2 are required to cancel the relevant trade report themselves from Phase 1 prior to 17:15 All remaining deferred publication trades will publish at 17:15 Customers are advised to archive any required information from Phase 1 TRADEcho WebPortal Technical Go-live date of TRADEcho Phase 2 Also go-live date of MIT Exchange Release 9.2 Deployment of new version of TRADEcho message protocols Deployment of new version of market data protocols (GTP) Introduction of revised segment MIC codes for on Exchange business Introduction of interim deferred publication regime Relevant MiFID II flag to be used to meet existing Rule 3040 requirement instead of the Reporting Condition where required for on Exchange trades Customers that carried forward deferred trades from Phase 1 must re-enter them into Phase 2 from 6:15 onwards, any remaining delay will be based on ruling Phase 2 delay regime 11 December 2017 Move of securities on trading segment s ITR (European Trade Reporting), AIM & AIMI (AIM on SEAQ) to SETSqx Other sector changes for instruments within segments STMM, SSMM & SET3 15

16 2 January 2018 (MiFID II technical configuration) Update of liquid vs. not liquid, ADT, ADNT and pre-trade LIS according to ESMA s MiFID II classifications for 2018 Full MiFID II deferred publication regime replaces interim configuration OTC & SI trade report submission extended until 19:15 each trading day Introduction of European Quoting Service closing prices Move of approx. 24 SET0 securities to SET1 3 January 2018 MiFIR / MiFID II enters into force Revised Rules of the London Stock Exchange enter force Existing Rule 3040 requirement to use Reporting condition revoked. MiFID II flags only to be used as required by MiFID II 16

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18 Copyright October 2017 London Stock Exchange plc. Registered in England and Wales No London Stock Exchange plc has used all reasonable efforts to ensure that the information contained in this publication is correct at the time of going to press, but shall not be liable for decisions made in reliance on it. London Stock Exchange and the coat of arms device are registered trade marks of London Stock Exchange plc. London Stock Exchange 10 Paternoster Square London EC4M 7LS T: +44 (0)