Technical User Group. Milano. 5 October 2017

Transcription

1 Technical User Group Milano 5 October 2017

2 Agenda MiFID II Technical Update PRIIPs Regulation / KIDs for IDEM market Member Portal TRADEcho Q&A Page 2

3 MiFID II Technical Update Flavio Ravotto Manager, Technical Account Management and Professional Services Client Technology Services Italy Page 3

4 Deployment Schedule Specifications for MIT 9.2, SOLA 11 and GTP have been published in March 2017 CDS available on: SOLA 11 CDS : July 20 th 2017 MIT 9.2 and GTP CDS: July 31st 2017 Dress Rehearsals on October 14 th and November 4 th 2017 for all markets (including EuroTLX) Participation to at least one Dress Rehearsal is mandatory Go-Live on Monday, November 27 th 2017 On Saturday, November 25 th 2017 a login test will be organized (to be confirmed) Go-live confirmation is subject to customer readiness Page 4

5 Conformance Test Conformance Test is mandatory for all applications connecting to SOLA, MIT and GTP platforms All the interconnected applications must execute the conformance test in order to be allowed to take part to the Dress Rehearsals Customers are warmly invited to contact the Market Access Team of Borsa Italiana to schedule the Conformance Test as soon as possible Page 5

6 Reference Data & Reconciliation Files Reference Data Files will be enhanced with MiFID II relevant information, layout will change on November 27 th 2017 Reconciliation Files for MIT markets will be extended with new MiFID II information (Client IDs, Execution and Investment Decision IDs, Algo Flag, DEA Flag, Waiver Indicators, Post Trade Flags), layout will change on November 27 th 2017 Reconciliation Files for IDEM markets (similar to the one provided for the MIT platform) will be introduced on January 3 rd 2017 Page 6

7 MiFID II Deployment Guide The MiFID II Deployment Guide has been issued on July 24 th 2017 The Guide outlines the detailed plan of the application of all MiFID II related changes the guidelines to follow between the technical go-live on November 27 th and the application of the MiFID II regulation on January 3 rd 2017 MiFID II activities have been split in 3 key dates: November 27 th 2017 (Technical go-live) January 2 nd 2018 January 3 rd 2018 (MiFID II come into force) In the following slides a summary of the guide is presented Page 7

8 Protocol Changes The new Protocols for Trading and Market Data applications that will go-live on November 27 th 2017 are not backward compatible therefore all Trading and Market Data applications will have to be updated to the new version Timestamps will be disseminated with microseconds granularity starting from November 27 th 2017 Page 8

9 Client, Investment & Exec IDs, Algo & DEA Flag On November 27 th a set of new fields will be required in order and quote entry messages (and sent back to client applications via Execution and Trade Capture Reports): Client ID Investment ID Execution ID Algo Flag DEA Flag Although present in the protocol, the content of the above fields will not be subject to any formal validation or cross check, only basic technical validations outlined in platform specs will be applied On January 3 rd, clients will be have the regulatory obligation to correctly fill in the above fields Guidelines document will be provided shortly Page 9

10 Waiver Indicators & Post Trade Flags Starting from November 27 th 2017 a set of new fields will be added to Execution Reports and/or Trade Capture Reports sent to customers: Waiver Indicators Post Trade Flags The content of the above fields should not be considered as significant by market participants until MiFID II legally enter into force on January 3 rd 2018 Page 10

11 Request for Quote (1) With MiFID II, RFQ can be: No pre-trade transparency (NPT, as it currently is on our markets) Partial pre-trade transparency (PPT) Full pre-trade transparency (FPT) Page 11

12 Request for Quote (2) For PPT RFQs, indicative Bid and Ask Prices of Quotes (average of Quotes Bid and Ask Prices sent by Market Makers active at execution) will be published via GTP (FDI channels only) and MITCH when (and if) the RFQ becomes executable and the RFQ trade is generated For FPT RFQs, all Market Makers Quotes (active at execution) will be published via GTP (FDI channels only) and MITCH when (and if) the RFQ becomes executable and the RFQ trade is generated PPT and FTP models will be introduced on January 2 nd 2018 (one day before MiFID II introduction) Page 12

13 Tick Table Policy (1) Change of Tick Table policy (live on November 27 th ) from min boundary < price <= max boundary to min boundary <= price < max boundary Introduction of new Tick Tables on MTA market (live on January 3 rd ) Borsa Italiana will introduce 6 new tick size tables, according to the requirements defined by RTS 11 on January 3 rd 2018 Page 13

14 Tick Table Policy (2) Introduction of new Tick Tables on ETF+ market the tick size table defined by RTS 11 corresponding to the highest average daily number of transaction will be applied to ETFs with equity underlying (also for RFQ) for other ETFs and ETCs/ETNs a dedicated tick table will be introduced RFQs on these instruments will use a fixed tick size, equal to euro The above changes will go live on November 27 th 2017 Page 14

15 New ATF Trades Publication Model (1) Trades on ATF instruments (ATF is a segment of ETF+) will be published via Market Data services with the price (1 as per convention) marked as Pending Once NAV is received: trades are rectified (price is set to the NAV) Market Data Services will publish the modification of Trades Two messages will be sent via market Data Services (GTP and MITCH), one cancelling the trade and one for re-publishing the trade with indication that an amendment has been made Page 15

16 New ATF Trades Publication Model (2) An ack of the modification of the trades will be sent to customers via a Trade Capture Report sent by the Post Trade Gateway GTP statistics for ATF will be calculated on the amended price (published at T+1) and not on the pending one (published at T) Changes to ATF Trades Publication Model will go live on November 27 th 2017 Page 16

17 Cross Orders on MIT Instrument Type November 27 th 2017 January 2 nd 2018 January 3 rd 2018 Shares Switch to volumeweighted spread price validation For Liquid Shares Reject of Cross Orders when volume-weighted spread is not available Liquid ETFs Liquid ETCs, ETNs, Fixed Income SeDeX Cross Orders disabled Reject of Cross Orders when volume-weighted spread is not available Cross Orders disabled Page 17

18 Negotiated Transactions New statistics calculation for Cross Orders (no updates to Last Trade Price, Low/High Price) for both MIT and SOLA platforms starting from January 2 nd 2018 Stop or Stop Limit Orders will no longer be triggered by Cross Orders Prices of Cross Orders will not influence circuit breaker validations for the following trade Switch from quantity to value-based control for the minimum size of a Block Trade on MIT markets on November 27 th 2017 Reject execution of negotiated transactions below the pre-trade LIS threshold for liquid products on IDEM market on January 2 nd 2018 Page 18

19 New trading Capacities on January 3 rd 2018 the new Matched Principal Trading Capacity will be added (according to membership trading authorizations) to existing ones on both the Borsa Italiana MIT and the SOLA markets The two new Matched Principal and Un-Matched Principal Trading Capacities will be enabled on EuroTLX: dedicated Comp IDs must be requested by Brokers authorized to use Matched Principal and/or Unmatched Principal Trading Capacities it will be possible to use Matched Principal and/or Unmatched Principal Trading Capacities only via the dedicated Comp IDs described above Page 19

20 Other Changes (1) on November 27 th 2017 : Introduction of new pre-trade controls on maximum order value on MIT platform and on maximum order notional value on SOLA platform Iceberg orders: Introduction of a control on the minimum value of iceberg orders on the MIT platform switch from quantity to value-based control for the minimum peak size Introduction of a control on minimum notional value on SOLA platform Changes to EMS and EMS multiplier parameters for the ETF+ market on January 2 nd 2018: Changes to EMS and EMS multiplier parameters for the SeDeX market Page 20

21 Other Changes (2) On November 27 th 2017 the classification of liquid vs. not liquid will be included in reference data: Shares: according to current MiFID classification Fixed income instruments, ETFs, ETCs and ETNs: all classified as illiquid, pending ESMA s classification SeDeX will be set as Liquid according to ESMA s MiFID II classification IDEM: according to ESMA s MiFID II classification On November 27 th 2017 the CPP (Closing Price Publication) session will be removed, Closing Prices will be disseminated: At the beginning of the Post Close session for segments that do not have a Closing Auction At the end of the Closing Auction session for segments that do have a Closing Auction Page 21

22 Market Making/Liquidity Provision (1) on MIT, Market Makers/Liquidity Providers are and will be given one or more dedicated Comp ID(s) in order to segregate Market Making/Liquidity Provision activity on SOLA, Market Makers/Liquidity Providers are and will be given one or more dedicated Trader ID(s) in order to segregate Market Making/Liquidity Provision activity a dedicated Naming Convention is applied to Comp IDs and Trader IDs used for Market Making/Liquidity Provision activity Page 22

23 Market Making/Liquidity Provision (2) Market Makers/Liquidity Providers send (single or dual side) quotes most of the time but under certain circumstances (depending on the type of activity) may send orders operators have to restrict the use of the dedicated Comp ID/Trader ID to the liquidity provision activity, using quotes or orders according to what is requested by the Market Making programs in place, independently from the fact that no technical restrictions will be put in place For existing Market Making programs: We are restricting MIT Specialist Comp IDs to send orders only on the subset of instruments they are associated for Specialist activity (work in progress, migration based on individual client migration plan) We will restrict SOLA Market Making Trader IDs to send orders only on the subset of instruments they are associated for Market Making activity starting from November 27 th 2017 Page 23

24 Market Making/Liquidity Provision (3) New MiFID II Market Making Scheme/Agreements (starting from January 3 rd 2018): Member Firms that will subscribe for the new Scheme/Agreements will be given dedicated Comp IDs (for MIT markets) and Trader IDs Member Firms will decide whether to perform this activity via quotes and orders or via orders only On SeDeX, Member Firms that will subscribe for the new Scheme/Agreements will be allowed to use orders only Page 24

25 Stressed Market Conditions Stressed Market Conditions will be defined at rulebook level Notification to customers of Stressed Market Conditions : No specific market changes will be introduced for notifying customers when Stressed Market Conditions occur on MIT Stressed Market Conditions will be derived from circuit breaker period plus n seconds after Announcement messages will be disseminated in order to announce Stressed Market Conditions on SOLA, Bulletin messages will be disseminated in order to announce Stressed Market Conditions Page 25

26 Legacy CDS In order to facilitate the testing of software applications and customer algorithms, a new test environment will be provided in parallel to the existing one starting from Q1 2018: a Legacy CDS will be provided for all the Trading and Market Data services of the Group s Trading Venues the new environment will be continuously aligned with production in terms of Software Version of Trading and Market Data Systems and Reference Data Page 26

27 Borsa Italiana Post Trade Transparency Service The existing Borsa Italiana s Post Trade Transparency Service will be discontinued with MiFID II For technical reasons, together with the MiFID II technical golive (November 27 th 2017) it will not be possible to keep providing the Post Trade Transparency Service LSEG will offer Post Trade Transparency facility for OTC trades via TRADEcho (see following presentation) Page 27

28 Transaction Reporting (1) RTS 22 and other RTS do not specify constraints on the format of the Trading Venue Trade Identification Code (TVTIC) used by Trading venues apart from: Trade ID should be unique Trade ID should be an alphanumerical string of maximum 52 characters The MiFID II Transaction Reporting Validation Rules published by ESMA state that TVTIC must be made of capital letters and numbers Page 28

29 Transaction Reporting (2) On MIT, Trade ID is unique per Market and is: a 8 bytes number on the NTG interface and on MITCH and GTP T concatenated to an alphanumerical string corresponding to the above ID base 62 encoded on FIX (Trading, Drop Copy and Post Trade Gateways) The alphanumerical identifier described above: is sent to downstream systems (Post Trading, Clearing, Settlement) is published in reconciliation reports is currently used for Transaction reporting purposes is a case sensitive alphanumerical string Page 29

30 Transaction Reporting (3) On SOLA: the currently used Trade ID is a progressive number unique per instrument In order to have a unique ID it has been decided to use the above Trade ID concatenated with the SICO Code (Group ID + Instrument ID) for Transaction Reporting purposes The SICO Code is case sensitive, therefore the ID made of the platform s Trade ID concatenated with the SICO Code is a case sensitive alphanumerical string Page 30

31 Transaction Reporting (4) We will rely on different TVTICs for Transaction Reporting purposes, using: on MIT, the 8 bytes number used on the NTG interface and on MITCH and GTP, asking FIX clients to apply the already documented base 62 decoding algorithm on SOLA, the base 62 decoded version of the identifier described in the previous slide TVTIC will be provided on Reconciliation Files Page 31

32 Borsa Italiana Transaction Reporting Service The existing Borsa Italiana s Transaction Reporting Service will close together with the go-live of MiFID II The Transaction Reporting Service will be active until the introduction of MiFID II on January 3 rd 2018 LSEG will offer Transaction Reporting facility via UnaVista, another company of LSEG that will apply as ARM (Approved Reporting Mechanism) Page 32

33 IDEM Key Information Documents Enrico Pellizzoni Head of Italy Equity Markets and Derivatives Products Page 33

34 PRIIPs Regulation (IDEM) (1) BIt will to produce KIDs (Key Information Documents) for IDEM contracts Borsa Italiana will follow an aggregated approach as allowed from recent ESMA s Q&A: 14 KIDs will be produced to describe existing IDEM contracts a KID will identify ISINs sharing the same contract specifications, expected payoff, and fee structure call options vs. put options on the same contract 2 different KIDs single name derivatives will have a single, aggregated KID for each product category (not for each individual underlying) weekly expiries are not identified by a separate KID Description of costs will include fees that BIt is charging to its market participants. Brokers must inform retail clients about their own costs Page 34

35 PRIIPs Regulation (IDEM) (2) 1. Futures on FTSE MIB 2. Mini futures on FTSE MIB 3. Futures on FTSE MIB dividend 4. Call options on FTSE MIB 5. Put options on FTSE MIB 10.Baseload Italian power futures 11.Peakload Italian power futures 12.Baseload German power futures 13.Peakload German power futures 14.Durum wheat futures 6. Stock futures 7. Stock dividend futures 8. Single stock call options 9. Single stock put options Page 35

36 PRIIPs Regulation (IDEM) (3) Available as.pdf files, free of charge in a dedicated webpage File names with a dedicated convention linked to reference data, and downloadable also as: Available for download via ftp server (MIT 702) Reviewed at least yearly (or in case of changes to contract specs, expected payoff, fee structure) Available in Italian, English, Spanish, German and French. Additional translations will be evaluated in due course Page 36

37 Member Portal Antonello Greco Technical Account Manager Client Technology Services Italy Page 37

38 RTS 24 - Requirements Client Identification code: Identifier of the Client (Local Person Identifier or Legal Entity Identifier), for client orders only Investment Decision within Firm: Identifier of the Person (Local Person Identifier) or the Algorithm taking the investment decision Execution Decision within Firm: Identifier of the Person (Local Person Identifier) or the Algorithm taking the execution decision Page 38

39 Long Code Short Code mapping Long Code Short Code Market messages Client ID Investment Decision Maker Executing Trader Page 39

40 Short Codes Reserved values 0: None. Valid for Client ID and Investment Decision ID. 1: AGGR, where several orders are submitted to the trading venue together as an aggregated. Valid for Client ID only. 2: PNAL, where a trading participant allocates an order to its client following submission of the order to the trading venue and has not yet allocated the order to its client at the time of the submission of the order. Valid for Client ID only. 3: CLIENT, valid for Execution Decision ID only. Page 40

41 Uploading Three options A trading firm will manage the short-long code mappings in a new section of the Member Portal in the following ways: Manual insertion Bulk upload through the Member Portal web interface Bulk upload via SFTP server Page 41

42 Uploading Manual insertion Short Code: numerical value between 4 and Long Code: alphanumerical string of 50 characters. Expected values are: Local Person Identifier Legal Entity Identifier Algorithm Identifier Code Type Natural Person Client LEI Algorithm Page 42

43 Uploading Bulk upload (1/2) Field Name Mandatory Description Short Code Y 4 4,294,967,295 Long Code Y 50 alphanumeric chars Identifier Code Type Y L: Client LEI N: Natural Person A: Algorithm Notes N Free text field Operation Type Y 0: New 1: Update 2: Delete Page 43

44 Uploading Bulk upload (2/2) A new record reporting information on the outcome of the upload is displayed: Status In Progress, Published, Published with errors, Not Published UserFile: the user s original.csv ResultFile: a.txt file containing the number of records added, updated, deleted ErrorFile: a.csv file listing the records containing errors. An Error Description field is added to instruct the user of the error. Page 44

45 Uploading SFTP server The.csv file has the same layout as the one used to upload through the member portal web interface The only difference is that the file must have a specific naming convention: - Venue_ShortLongCodes_YYYYMMDD_NN.csv The root folder of the sftp server is the Firm ID which, in turn, contains an IN and an OUT folder with respectively read-write and read only access. The IN folder will contain the bulk upload.csv file while the OUT folder will store Results File and Errors File (if one or more records are rejected). Page 45

46 Upload by difference or «from scratch» When uploading the file, the user can choose to: insert, modify and delete the existing set of short-long codes, hence working by difference; replace the whole list of existing short-long codes with the ones included in the file, hence working from scratch. Operation Type can only be populated with 0 Page 46

47 Constraints Two different records can not have the same pair <Short Code, Identifier Code Type> Local Person Identifier and Legal Identity Identifiers have to be used respectively to identify a Natural Person and a LEI Following a cancellation, the upload of a new record with the same pair <Short Code, Identifier Code Type> will be rejected. Page 47

48 When uploading mappings Short Code/Long Code mappings must be uploaded within the market close (time limit to be defined) of the same day as they are used as part of the layout of market messages sent to the exchange Trading participants failing to report the records at day T will be notified and must download the Missing Short Codes report to find out the discrepancies to be corrected The Missing Short Code report for the day T is available at T+1 and it lists the discrepancies of the last five working days Page 48

49 Additional Enhancements Trader IDs Risk Management users for pre-trade validation functionalities (PTV) Self Execution Prevention Market Making Strategies Mass Cancellation Back Office SELECT Position Report as required by RTS 21 - Application of position limits to commodity derivatives Page 49

50 Go live The new Member Portal will go-live on November 2017 Trading participant will have a one month window to test the upload of mappings on the Member Portal before the actual MIFID II go live on January, the 3 rd No validations on how short codes are used in the layout of market messages will be performed except for formal integrity checks The User Manual is already available online on both Borsa Italiana and EuroTLX websites Page 50

51 TRADEcho Roberto Fumagalli Technical Account Manager Client Technology Services Italy Page 51

52 POST TRADE TRANSPARENCY OBLIGATION MiFID I requires customers to publish OTC trades done on equity instruments listed on European regulated markets. Consob extended this obligation to all instruments listed on regulated market (including MOT, SeDeX, ETFPlus and MTS). MiFID II extends the reporting obligation to all instruments (equity and non equity) listed on European regulated markets, MTF and OTF. The service offered by Borsa Italiana (PTTS service) to fulfill this obligation will close on 27 th November 2017 (release of MIT Platform MiFID II version compliant). LSEG will offer Post Trade Transparency facility for OTC trades via TRADEcho. Page 52

53 TRADEcho Page 53

54 TRADEcho - POST TRADE TRANSPARENCY MiFID II regulation introduces the requirement for Investment Firms and venues to make public trading activity. Thus, trading venues and Investment Firms must publish details of transactions as close to real time as technically possible: within 1 minute for equity and equity like within 15 minutes for non-equity (reducing to 5 minutes). In some circumstances, the immediate publication of a trade could lead to a reduction in liquidity and increase execution cost for investors. Subsequently deferred publication is available where certain criteria is met such as it being a large trade or a trade in an illiquid product. Page 54

55 TRADEcho - POST TRADE TRANSPARENCY TRADEcho APPROVED PUBLICATION ARRANGEMENT (APA) TRADEcho s APA provides investment firms with a mechanism to publish trades they have executed and thereby meet their MiFID II post-trade transparency obligations. TRADEcho will be operated as an APA, applying relevant deferrals to provide the market with a clear and concise tape of your trades. Trades will be published across all asset classes in line with the regulatory reporting timeframes. Deferred publication may be authorized for certain trades that would expose liquidity providers to undue risk. Page 55

56 TRADEcho - POST TRADE TRANSPARENCY SMART REPORT ROUTER TRADEcho s SRR determines if and when a buy or sell-side counterparty should publish a trade and, when there is a requirement, routes that trade to an Approved Publication Arrangement (APA) of choice for publication. The SRR can help you facilitate Assisted Reporting on behalf of your clients, and it is APA agnostic so that firms can use alternate or multiple APAs to make trades public. By using SRR, instead of connecting directly to multiple APAs, firms achieve flexibility while keeping costs down. By passing a drop-copy of every execution to TRADEcho, the SRR will ascertain which trade needs to be reported and which doesn t in real time The SRR mitigates all risk in trade reporting correctly TRADEcho manage and maintain the rules engine and the significant amount of reference data required to make this determination Page 56

57 TRADEcho - POST TRADE TRANSPARENCY ASSISTED REPORTING TRADEcho provides firms with the ability to perform assisted reporting on behalf of clients Support your clients choice of APA with ease Leverage your counterparty connectivity whilst maintaining regulatory oversight Real-time visibility of reports submitted by your counterparty Facilitates real-time and end of day reconciliation REFERENCE DATA All TRADEcho services are complemented by the large suite of reference data provided by UnaVista. (LEI Data Management, ISIN Issuance) Page 57

58 TRADEcho - PRE TRADE TRANSPARENCY TRADEcho SI Determination; An investment firm executing client orders against their own proprietary capital on a frequent and systematic basis may be classified as an SI and will be obliged to provide public, firm quotes. This is dictated by the asset class, liquidity, frequency and size in which you are dealing. TRADEcho SI Determination Service calculates your status for each instrument and keeps you informed of your SI status. TRADEcho SI Quoting; With TRADEcho's SI Quoting you can validate your quotes and publish them via the LSE market data channels or the TRADEcho website. Page 58

59 TRADEcho ACCESS AND CONNECTIVITY Access to TRADEcho Service is available via web GUI/https FIX FIX technical specifications available at the following link Connectivity to the Service is available via Milan Colo/CMC Milano via Internet VPN connection (LAN-to-LAN) Via Internet/https (for web GUI only) Page 59

60 Contacts Page 60

61 Client Technology Services Italy Technical Account Management and Professional Services Clients-Services@borsaitaliana.it Market Access (configurations, enablements, conformance tests, etc.) market-access@borsaitaliana.it Service-Desk (customer support desk) Toll Free: From mobile: service-desk@borsaitaliana.it Page 61

62 Q & A Page 62