MIFID II The critical importance of reference data MARCH 2017

Transcription

1 MIFID II The critical importance of reference data MARCH 2017

2 What is MIFID II / MIFIR MIFID II / MIFIR is legislation for the regulation of investment services within the European Economic Area that goes in to effect January 2018 Goals of MIFID II / MIFIR Fairer, safer and more efficient markets Greater transparency for pre and post trading activities Stronger investor protection by improved disclosure to strengthen the best execution Reference Data Impact MIFID II/R expands the range of reporting requirements beyond equity markets to cover all asset classes including derivatives All financial products (instruments) that are to be traded in EEA need to be registered with ESMA with necessary reference data BEFORE they are traded MIFID II/R requires pre-trade price transparency, post-trade reporting and transaction reporting but what is required is very dependent on WHO is trading and WHAT instrument they are trading The complex set of rules and waivers mean good access to accurate INSTRUMENT and COUNTERPARTY reference data is essential Primary sources of data are ESMA (NCAs), ANNA, GLEIF and Trading Venues (TV) RM, MTF and OTF 2

3 Requirements Under MIFID II / MIFIR R E G I S T E R / S E T U P P R O D U C T Any financial product that will be traded needs to be registered with ESMA, with its associated reference data. Any firm issuing new products will need to register those products Any firm wishing to make a market in a product needs to confirm that the product is registered with ESMA / NCA and set up the instrument in their security master with all associated reference data P O S T - T R A D E R E P O R T I N G One of the counter-parties needs to report trades within 15 minutes of execution either direct or through an Approved Publication Authority (APA) Reference data is needed to determine who reports the trade for this specific instrument. Depends on counterparty, instrument, buyer or seller P R E - T R A D E P R I C E T R A N S P A R E N C Y Any TV or SI needs to provide price transparency for the instrument pre-trade AND trade at that price unless a waiver can be applied Reference data is needed to apply the waiver, Liquid, Large in Scale (relative to market), order is larger than Size Specific to Instrument (SSTI) T R A N S A C T I O N R E P O R T I N G All counterparties need to report transactions clearly identifying what was traded and the parties involved in the trade either direct or through an ARM Transaction data is need to enrich transactions based on Regulatory Transaction Standards 1, 2, 22 and 23 Reference Data requirements permeate throughout the MIFID reporting life cycle. A seamless and cost effective solution to source and integrate the regulatory data you need to support your reporting requirements is essential! 3

4 MIFID Data Sourcing A Reference Data Utility can reduce the complexity of managing and integrating these reference data sources into a single schema so that you can more easily integrate them into your EDM and trading platforms Source Source Detail Content Highlights ESMA RTS 1: ANNEX 1, 2 and 3 RTS 2: ANNEX, 2, 3, 4 For Equity Like products supports: Reference data that is required for Pre and Post Trade reporting Reference data to determine Normal Market Size, Standard Market Size, Average Daily Turnover (ADT) and minimum size orders Calculates deferred notification periods using Holiday and Trading Hour calendars For Bonds, Structured Products, Derivatives and Emissions supports; Asset Class, Sub-Asset Classification and Sub-Class using CFI Codes and security underlier Average Daily Notional Amount (ADNA), Average Daily Number of Trades (ADNT), Average Daily Turnover (ADT), thresholds supporting SSTI and LIS RTS 22: ANNEX 1 Supports reference data required for Post Trading reporting RTS 23: ANNEX 1 Supports reference data required for transaction reporting Calendars RTS 28: ANNEX 1 Supports ESMA Instrument Class and Sub Class Holiday and Trading Hours Holiday calendars and trading hour calendars are required to support deferral notification periods ANNA DSB Supports ISIN look for OTC transactions GLEIF Trading Venue NCAs Direct Exchange feeds for Listed Derivatives Use for a lookup to validate ISIN Uses country code of LEI in calculation of Best Fit logic for ISIN Supports ISIN for derivatives from exchange feeds Supports the universe of Listed Derivatives that will allow banks to determine if an OTC security has similar economic facts as a listed security and should be in included in position reporting as a listed product Direct sourcing of NCAs is required because suspension and removal notifications are expected at the listing level Deferral notification rules are also expected to be specific to an NCA 4

5 SPRed Overview An industry initiative founded by Goldman Sachs, JPMorgan Chase, Morgan Stanley and SmartStream that consolidates data management activities into a single utility service for securities reference data The Reference Data Utility is a separate company owned by SmartStream and the founding banks The banks are shareholders and customers The banks subscribe to and pay for services The banks work with the Reference Data Utility to collectively define standards, best practices and priorities 5

6 Why the RDU? The RDU Solutions are designed to meet the challenges expected with MIFID II aggregation of data sources; imperfect data from regulatory feeds; cross reference of classifications and identifiers; compressed project time frames R D U S O L U T I O N S Strategic Partners Aligned to be source provider for with Systematic Internaliser and Approved Publication Arrangement (APA) Providers Time to Market The RDU anticipates changing requirements and delays in the availability of ESMA. Development cycles and testing environments are designed to be nimble and flexible. Testing integration with clients is scheduled for April 2017 Abstraction The RDU manages the processing and changes to data from MIFID sources and insulates clients from the changes through an XML distribution interface Normalization/Aggregation Provide a single schema of normalized MIFID referenced data built from regulatory feeds and client preferred sources Ease of Use Clients can consume files for a target set of instruments, either full or delta files Multiple file formats can be distributed and customized to house standard API available for trade by trade enrichment Support for liquidity calculations 6

7 RDU MIFID Service Offerings Hosted Solution The File Based Service integrates multiple sources into a single schema for Derivatives CONTENT: and for Equity Like products RDU FILE SERVICE HOSTED UTILITY SERVICE PROVIDING SCHEDULED BASED DELIVERY ESMA MIFID Identification (Asset Class, Sub-Asset Class and Sub Class) Support for RTS 22, 23, 28 reference data requirements required for transactional reporting Support for pre and post trade liquidity and threshold calculations using RTS 1 and 2 Trading Venue/ Exchange Feeds: Provides reference data sourced directly from derivative exchanges enriched with MIFID required attributes and classifications to support post trade reporting Coverage for the universe of listed derivative products that can be used to determine if an OTC transaction has an economically equivalent listed product that needs to be applied to position limits Enrichment Sources National Competent Authorities Holiday Calendars FUNCTIONALITY: Provides an XML schema for Derivatives and Equity Like products Full and delta processing Flexible delivery schedule Customized attribution 7

8 Hosted Solution How it works The following are key processing components for the RDU hosted service DA Q UDL XRE F Component Sources Data Acquisition Universal Data Loader Cross Reference Data Delivery Descriptions Sources Supported for MIFID II Coordinates the retrieval of data feeds from market sources and the transfer to the RDU environment Consumes the data feed, validates, the file, normalizes the fields, and persists the data Maintains the inventory of legal entities and securities. Links them across data sources through symbology matching and/ or field matching RDU clients receive customized messages or files based on a clients source and attribute preference 8

9 RDU MIFID Service Offerings Request Service The RDU provides Rest APIs that allow clients to request MIFID data by ISIN and Classification RDU REQUEST SERVICE REQUEST APIs ALLOWING ENRICHMENT TO SUPPORT PRE AND POST TRADE/ TRANSACTIONAL REPORTING Requests: Request Type: By ISIN Send: ISIN, Executing Party LEI, Counterparty LEI Request Type: By Classification and identify Best Fit ISIN Send: ESMA Asset Class, ESMA Sub- Asset Class, ESMA Sub Class Resolve to Best Fit ISIN based on hierarchical rules and look up values Uses GLEIF to identify country code of LEI as part of Best Fit ISIN rule logic Reply: Provide a XML return message including the following values: ISIN MIFIR Identifier Asset Class, Asset Sub Class, Sub Class Instrument Full Name Trading Obligation NCA Suspension, Deferral and Type Liquidity Class ADT, AND, AVT Standard Market Size Normal Market Size Pre and Post Trade LIS and SSTI Executing Party Status Counterparty Status Exchange Conversion Rate Relevant market Search ESMA Registry data to determine if Executing Party LEI is SI or MIF Search ESMA Registry data to determine if Counterparty Party LEI is SI or MIF 9

10 Planning Assumptions Data Dictionary defining MIFID content supported currently available XML schema for File Based Service available in March Request Service ready for UAT testing in May Will use simulated data for testing as ESMA data feed will not be available for test GLEIF data will be available ANNA has not provided sufficient documentation yet to support UAT testing by April July 2017 RDU will participate in Industry testing UAT testing and Industry testing will include support for sourcing data directly from derivative exchanges (37 exchanges) enriched with MIFID data. National Competent Authorities evaluating sourcing data directly from NCAs for suspensions and deferrals and list of Systematic Internalizers by ISIN 10

11 APPENDIX 11

12 Sourcing: Trading Venue Direct Sourcing The following exchanges are supported for direct sourcing and enrichment for MIFID Data MIC CODE EXCHANGE MIC CODE EXCHANGE MFOX NYSE EURONEXT - MERCADO DE FUTUROS E OPCOES XMRV Meff Renta XMON Euronext(Paris) XDMI IDEM XBRD Euronext(Brussels) XLOD LONDON STOCK EXCHANGE DERIVATIVES MARKET XEUC Euronext(Amsterdam) IFLL ICE Futures Europe - Financial XEUE Euronext(Amsterdam) IFLO ICE Futures Europe - Equities XMAT EURONEXT PARIS MATIF IFEU ICE Futures Europe XADE ATHENS EXCHANGE S.A. DERIVATIVES MARKET IFLX Ice Futures - Agriculture XEUR Eurex NDEX ICE ENDEX NORX NASDAQ OMX COMMODITIES XOSL OLSO OMIP OMIP IBERIAN PENINSULAR EXCH BMFM DERIVATIVES REGULATED MARKET - BMFMS SBMF SPOT REGULATED MARKET - BMFMS XEEE EUROPEAN ENERGY EXCHANGE AG CMED CME EUROPE - DERIVATIVES WDER WARSAW STOCK EXCHANGE/FINANCIAL DERIVATIVES XPXE POWER EXCHANGE CENTRAL EUROPE XBUD BUDAPEST STOCK EXCHANGE XNLX NASDAQ OMX NLX TOMD TOM MTF (Previously listed as TOMX) BLTX BALTEX - FREIGHT DERIVATIVES MARKET FISH FISH POOL ASA XLME LME N2EX N2EX XHEL OMX NORDIC EXCHANGE HELSINKI OY XGME GESTORE MERCATO ELETTRICO - ITALIAN POWER EXCHANGE XCSE OMX NORDIC EXCHANGE COPENHAGEN A/S XSTO Nasdaq OMX 12