Trendkongress 2017 Investor Protection Herausforderungen an Finanzmarktdaten im regulatorischen Umfeld

Transcription

1 Trendkongress 2017 Investor Protection Herausforderungen an Finanzmarktdaten im regulatorischen Umfeld Andreas Steiner 26. Januar, 2016

2 Agenda Introduction IRS Section 871(m) Sanctioned Securities Monitoring Service Regulatory Challenge MiFID II PRIIP KIDs 9/1/2016

3 Introduction SIX provides a comprehensive range of services in four business areas Swiss Exchange Securities Services Payment Services Reference market for about 35,000 securities Leading exchange for life sciences in Europe Broad offering in the area of exchange-traded funds Self-regulation under Swiss law Leading partner for trading platforms in Europe Swiss settlement organization and central securities custodian Switzerland's largest manager of share registers Electronic processing of interbank payments (SIC and eurosic), e-bills and direct debits, repurchase agreements (repos) and mortgage and land registry transactions (Terravis) A leading provider of financial information in Europe Leader in the area of reference data International presence in 23 countries 86 years of experience in the financial information business Market leader in the acquiring and processing of cards in Switzerland, Austria and Luxembourg and market leader in card issuing in Austria Leading one-stop provider of efficient solutions for cashless payments

4 Neuer Standort ab September 2017 Marxergasse 1B A-1030 Wien

5 MARKET DRIVER 2017 Regulation Great Again IRS Section 871(m) Transparency Micro-structural Issues Data Publication and Access Requirements Trading Venues Investor Protection Post-trade Issues Transaction & Reference data reporting Commodity Derivatives PRIIP / KIID UCITS AIFMD MiFIDII EMIR MAR FINFRAG FIDLEG

6 IRS Section 871(m) SIX Tax Data Offering

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8 SIX U.S. Tax Data Offering Existing Tax Data Additional Tax Data QI Regime Issuer Data IRS Section 871(m) FATCA Instrument Data Other U.S. Tax/Regulatory Data

9 IRS Section 871(m) introduction IRS Section 871(m) final and proposed regulations were introduced by US Treasury and IRS in order to implement a tax reporting and withholding regime on dividend-equivalent payments. The regulation is in force since 1 January Along with FATCA, Section 871(m) was embedded in the HIRE Act of 2010, and has to be implemented by financial institutions globally. The regulation affects transactions in derivative products that have either U.S. sourced equity underlying's or indices containing U.S. sourced equity constituents giving rise to FDAP income. From an underlying reference data standpoint, Section 871(m) raises two main challenges: 1 Identifying the financial instruments (products) that are in scope or potentially in scope SIX provides the data on instrument level tax status 2 Implementing the required IRS reporting and withholding SIX provides the data required to calculate dividend equivalent amounts

10 IRS Notice Phase-in period for 871(m) and related withholding provisions: 2017: Withholding begins on delta-one transactions only Good faith standard applies to withholding agents and taxpayers determining 871(m) amount Simplified method of determining combined transactions (applies to withholding agents only) 2018: Withholding begins on remaining transactions below delta-one Good faith standard with respect to non-delta-one transactions 2020: Exemption on certain Exchange-traded notes ends

11 IRS 871(m) Final Regulations published (m) Final Regulations - Highlights: Effective date: Delta calculation for listed options the delta of an option contract that is listed on a regulated exchange is the delta of that option at the close of business day before the date of issuance. On the date an option contract is listed for the first time, the delta is the delta of that option at the close of business on the date of issuance. Qualified indices for new indices a test whether an index is a qualified index has to take place at the first date created We are analyzing the Final Regulations and will adopt our rule set and processes accordingly.

12 Possible 871(m) Equity-linked instruments ELIs: Futures Traded Options Warrants Mini-Futures Structured Securities Convertible Bonds Does the instrument have a U.S. equity as an underlying security? Yes Is the underlying an 871(m) qualified index? Does the instrument qualify as a Simple Contract? Yes Delta 1.0 at issuance for minimum 1 underlying? No Yes Complex Contract Number of shares in initial hedge for minimum 1 underlying Instrument qualifies as Specified for 871(m) withholding and reporting SIX data Data provided by issuer Specified for 871(m) reporting No Yes Yes - In scope - In scope; confirmed - Potentially in scope - Potentially in scope; confirmed - Exempt qualified index - Exempt qualified index; confirmed - Exempt on IRS exception list for ETNs *NEW*

13 Rule-based classifications and issuer-provided data Using and expanding existing data structures in the SIX reference data feed: Tax Regulation (FSD), Underlying Information (FQD) and Daily Delta (PRD)

14 ETD delta information provided at pricing level (Screenshot SIX id)

15 IRS Section 871(m) SIX Data Flow 871(m) rules set ETD Exchanges Delta on pricing level Classification in scope / potentially in scope VDF Qualified index information Valordata Feed Automatic upload Delta at issuance FTP File based delivery Client Structured Product Issuers Semi-automatic spreadsheet upload Shares referenced in initial hedge Find further details on:

16 SIX Sanctioned Securities Monitoring Service A joint service with Bureau van Dijk powered by CetrelSecurities

17 17 The service provides daily information on sanctioned companies and their issued fungible securities. These identified securities must not be bought, held, traded or serviced by any institution having activities in jurisdictions that have active sanction regimes in place.

18 SIX Sanctioned Securities Monitoring Service Most of the financial institutions have implemented sound and robust KYC / AML processes, methods and tools. Different picture for the Identification of Sanctioned Financial Instruments (FI) within the Asset Management, Trading, Custody business. SIX Sanctioned Securities Monitoring Service: Are you entitled to onboard a FI in your portfolio? Are existing FI of your portfolio sanctioned? Do existing FI of your portfolio have become sanctioned over time?

19 SIX Sanctioned Securities Monitoring Service Sanctions: A major challenge Risk of serious financial and reputational damage to: Challenge for retrieving all financial instruments of sanctioned companies is a heavy and often manual work Challenge of getting data on sanctioned countries companies individuals [relying on BVD data]

20 SIX Sanctioned Securities Monitoring Service

21 SIX Sanctioned Securities Monitoring Service Three distinct modules:

22 SIX Sanctioned Securities Monitoring Service Three distinct modules:

23 Ukraine Crisis sample RU TREDZBK % Bank Bills General License TRQDZBKK1510 EU833/2014 TRQDZBKK1510

24 SIX Sanctioned Securities Monitoring Service Three distinct modules:

25 International Sanctions EU2015/427: Arkady Romanowitsch Rotenberg 100 % 79,1%

26 2. BvD and CETREL Securities Partnership

27 3. Summary Cluster Munitions Regulation: Oslo Convention transformed into local laws Output: List of financial instruments and issuers in direct or indirect relation Ukraine Crisis Sanctions Regulations: EU: 833 & 960/2014, US: 13662, CH: SR , CA: SOR/ & 195 & 204 SOR/ , AU: SLI-30/2015 Output: List of financial instruments and issuers International Sanctions Regulations: EU / US / UK / UN / HK Output = Sub-module based (Domiciles + Companies + Individuals = List of financial instruments and issuers considering Beneficial Ownership information of BvD [10%+1 / 25%+1 / 50%+1]) Further details on our website:

28 Regulatory Challenge MiFID II Investor Protection & Product governance

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30 MiFID II affects the whole value chain CLIENT SEGMENTATION ADVICE / SALE ORDER EXECUTION CLIENT REPORTING Retail / Professional / Eligible Counterparty (companies LEI, domicile, sector codes) Financial situation (income, assets, liabilities) Investment objective (investment horizon, risk profile, ability to bear losses, experience & knowledge) Product Suitability, appropriateness, execution only (complex / noncomplex classification, target market criteria, risk indicators, product costs Product Intervention Product Documentation (UCITS KIIDs PRIIPs KID, Prospectus) Pre-trade transparency (ESMA s liquidity assessment, trading suspensions, waivers) Post-trade obligations (Transaction reporting (MIFID II reportable instrument flag, deferrals, instruments reference data) Best Trading Venue Portfolio reporting (market value, fair value, benchmarks, interest and dividends payments, corporate actions) Leveraged instrument indication Statement of assets (MIFID II eligible instruments)

31 Advisory must ensure that retail investors are only offered investment products suitable to their risk appetite KEY DATA SETS Target market content on instrument level Complex/non-complex classification Trading suspensions published by trading venues / regulators Product risk classification Product cost breakdown Best execution Manufacturers & distributors need a standard form for information exchange

32 How should manufacturers define a target market for their products? ESMA CP draft guidelines 2016/1436 ( ) mention 6 categories: The type of client to whom the product is targeted; Knowledge and experience Financial situation, with a focus on the ability to bear losses; Risk tolerance and compatibility of the risk/reward profile of the product with the target market Clients objectives Clients needs Additional categories should be added if, in the manufacturer s view, they are important to describe the product.

33 What are the target market considerations for a distributor? should define the target market in a more granular way (manufacturer definition + client knowledge) should conduct a thorough analysis of the characteristics of its client base distributors may not just rely on the manufacturer s target market but must consider how the definition fits to their client base. distributors should decide which products are going to be actively offered to certain groups of clients the nature of the products should be taken into account, particularly products characterized by complexity/risk features

34 Target market assessment is essential to a common, uniform & consistent application of product governance under MiFID II CLIENT TYPE PRODUCT SUITABILITY PRODUCT FEATURES CLIENT DATA INVESTOR NEEDS / OBJECTIVES TARGET MARKET ASSESSMENT PRODUCT DATA VENUE PRODUCT INTERVENTION / SUSPENSION BEST EXECUTION POLICY INVESTMENT DECISION APPROVED ON REQUEST DECLINED

35 Key takeaways for successful product governance Manufacturers need to define the target market if they want their products to be distributed successfully Distributors must ensure that their distribution strategy is consistent with the identified target market including appropriate policies and procedures to ensure that the product or service complies with product governance rules reviews of their investment advice and execution policies on a min. yearly basis Correct and comprehensive assessment and disclosure of all risks related to the target market

36 MiFID II Transparency and Market Data Reporting

37 Market Structure & Market Transparency Market Transparency Transparency requirements (RM, MTF, OTF, SI) Eligible derivatives traded on organized trading facilities (OTF) as new trading venue category Inclusion of Systematic Internalisers Introduction of algorithmic trading rules and restrictive regime for high frequency trading Pre- and Post trading transparency Market Structure Mandatory position limits on commodity derivatives Introduction of organized trading facility (OTF) for non-equity instruments Limitation on trading outside regulated markets (e.g., dark pools) Eligible derivatives to be traded on regulated markets Near-real-time reporting requirements to regulators Client reporting requirements for all asset classes Yearly report of Top 5-trading venues Post-trade reporting Transaction reporting Data Reporting MiFID II Target Markets Complex / non-complex classification Product costs Investor protection

38 Schemata Market Structure Regulated Markets (RM) Multilateral Trading Facility (MTF) Organized Trading Facility (OTF) Multilateral trading Equity and non- equity trading Multilateral trading Equity and non- equity trading Multilateral trading Non-equity new MIC Operating/Segment Trading interruptions Trading suspensions Listing Status Price intra day Price daily Systematic Internalizer (SI) Bilateral trading Equity and non-equity trading SI Registered Flag SI Effective Date Over-the-counter (OTC) Bilateral trading Equity and non-equity trading

39 Schemata Pre-trade Transparency trade Trading Venue RM MTF OTF SI Liquidity Flag Waivers SSTI - SSTI threshold floor - SSTI trade percentile LIS - Liquid threshold floor - Liquid trade percentile Pre-trade Transparency Disclosure of bid/ask prices and size Quotes on client request OTC No SSTI/LIS Illiquid threshold floor/percentile no pre-trade transparency

40 Schemata Post-trade Transparency trade Trading Venue RM MTF OTF No permanent waivers but Liquidity Flag ADNT ADNA LIS - Liquid threshold floor - Liquid trade percentile AVT ADT Post-trade Transparency Trade reporting as close to real time as possible SI OTC No SSTI/LIS Illiquid threshold deferral flag, source Deferred 48 hours to 3 months

41 Transaction Reporting Identifiers, classification & flags Requirements Reporting Entity Buyers Details Seller Details Order Transmission Transaction Details Instrument Details Other relevant Information Our expected Offering Examples: MIFID II In-Scope / Eligible Reportable instrument Flag Instrument Identifiers and classification Instrument Reference Data Underlying Instrument etc.

42 Best Execution Requirements Quarterly report by trading venues (RM; MTF, OTFs and SIs) related to execution quality that take into consideration price, costs, speed and likelihood of execution for each instrument) Annual reports by investment firms to their clients with their top 5 execution venues along with specific data relating to the quality of execution Our expected Offering Examples: Average Trade Size Average Executable Size Average Spread Best Trading Venue (BTV) Tick size etc.

43 Don t miss the latest updates on MiFID II visit our MiFID II website

44 PRIIP KID Service SIX your one stop shop for PRIIP

45 SIX your one stop shop for PRIIP SIX Regulatory Document Service Generate regulatory documents Download regulatory documents Upload pre-generated regulatory documents (produced by third party generator) PRIIP Scope Indicator (VDF) Get your latest updates on PRIIP:

46 Three important use cases: generate, distribute and obtain PRIIPs (independent which solution you will use) Regulatory Document Generation Service Product information and trade-specific data from customer Regulatory Document Hub (Doc Hub) Data mapping including calculations of risk and performance figures Legal jurisdiction terms and conditions Third Party Document Generation (uploading third party documents) EU regulatory documents are generated Uploading documents generated by third parties Doc Hub Regulatory documents are available for download and archived for 10 years Advisors use a single interface to retrieve all regulatory documents

47 PRIIP Scope Indicator - VDF Representation In VDF, the "PRIIPs Scope Indicator" (code 27) can be found in Message Type TKFSD "Tax and reporting/regulation" Element TKFSD.FSR.7865 "Report/regulation name" Element TKFSD.FSR.7863 "Report/regulation applicability SIX indicates for each instrument the applicability of the PRIIPs Regulation Code Description Long Description 1 Liable/ applicable This tax / reporting / regulation is applicable to this instrument 2 Potentially liable/ applicable This tax / reporting / regulation is potentially applicable to this instrument 11 (new) 12 (new) Potentially not liable/ applicable Liable/ applicable - confirmed This tax / reporting / regulation is potentially not applicable to this instrument This tax / reporting / regulation is applicable to this instrument - this entry has been confirmed by the issuer or a trusted source respectively (possible further information in element Text (FSD.FSR.9998)). 13 (new) not liable/ applicable - confirmed This tax / reporting / regulation is not applicable to this instrument - this entry has been confirmed by the issuer or a trusted source respectively (possible further information in element Text (FSD.FSR.9998)). For instruments that are not included in the scope or to which the Regulation does not apply, the PRIIPs scope indicator will be left blank.

48 Thank you for your attention! Andreas Steiner Sales Director Branch Manager T F M andreas.steiner@six-group.com SIX Deutschland GmbH Zweigniederlassung Wien Wipplingerstraße 34 A-1010 Wien

49 Disclaimer This material has been prepared by SIX Group Ltd, its subsidiaries, affiliates and/or their branches (together, "SIX") for the exclusive use of the persons to whom SIX delivers this material. This material or any of its content is not to be construed as a binding agreement, recommendation, investment advice, solicitation, invitation or offer to buy or sell financial information, products, solutions or services. It is solely for information purposes and is subject to change without notice at any time. SIX is under no obligation to update, revise or keep current the content of this material. No representation, warranty, guarantee or undertaking express or implied is or will be given by SIX as to the accuracy, completeness, sufficiency, suitability or reliability of the content of this material. Neither SIX nor any of its directors, officers, employees, representatives or agents accept any liability for any loss, damage or injury arising out of or in relation to this material. This material is property of SIX and may not be printed, copied, reproduced, published, passed on, disclosed or distributed in any form without the express prior written consent of SIX SIX Group Ltd. All rights reserved.