MiFID II Roundtable Hotel Napoleon, Paris Thursday, 2 March 2017
NEX Optimisation - Ecosystem CCPs (1) Buy-side Transaction Trade Aggregation and Confirmation Regulatory Reporting Transaction Data Analytics, Treasury & Portfolio Finance Portfolio Portfolio Compression & Valuation Portfolio Portfolio Reconciliation & Margining Portfolio Risk Mitigation Sell Side Data Order and Trade Data Custodians (3) NETWORKS CSDs (2) Cloud-based voice trading platform (3) Utility Settlement Coin Digital cash model (3) Collateral processing (3) Reconciliation ondemand Risk analytics (3) (3) (3) Distributed Ledger Technology infrastructure provider Developer of Distributed Ledger Technology Provides clients with a portfolio of services to reduce their costs and optimise their risk and capital across the transaction lifecycle (1) Central Counterparty Clearing Houses (2) Central Securities Depositories (3) Minority strategic investments under Euclid CONFIDENTIAL 8 MARCH 2017 2
A business built by people who understand how to process large volumes of enriched, validated reporting data 1750 1500 1250 c. 20% market share Equivalent to 2 ND ranked TR Reports / millions 1000 750 500 250 0 2012 2013 2014 2015 2016 MiFID EMIR CONFIDENTIAL 8 MARCH 2017 3
NEX Regulatory Reporting Hub - Reporting to in house and external end-points Reporting Hub Data Ingestion EMIR MiFID ARM Client Universe Streaming Data Batch Data Intelligent Response Determination Determination & Eligibility Eligibility Enrichment Validation Exception Mgmt Routing MiFID II ARM REMIT APA DFA CAN Reconciliation MIS ASIC MAS HKMA FinfraG Bank of Israel Other regimes CONFIDENTIAL 8 MARCH 2017 4
Meeting the Challenges of MiFID II Reporting Rules CONFIDENTIAL 8 MARCH 2017 5
The MiFIR Pain Map Institution ISIN Reporting Client Personal Details AOTC One to Many (INTC) Reporting OTC Derivative Reporting RTO Reporting APA/Direct trade Publication Reference Data Submission Multi-Regime Reporting Reporting On Behalf Of.. Retail Forex Broker N N N N N N N N N Proprietary HFT trader Y N N N N N N N N Private Wealth Manager Y Y Y N N N N N N Comments No reporting if based on spot prices rather than venue-traded contracts On-venue trading of vanilla cash products with no clients is simplest case Assumes derivatives and cash products all venue-traded (via broker) Asset Manager (excluding Private Wealth Mgmt) Y N Y Y N N N N N Assumes no private clients but some OTC derivatives (eg CFDs) Retail Derivatives Firm Y Y Y Y N N N N N Full Service Broker Y Y Y Y Y N N N N Complex Investment Firm Y Y Y Y Y Y Y Y N Trading Venue (RM, MTF, OTF) OTC reporting of (some) client side and ISIN reporting of hedges. Client personal details needed. Intermediaries likely to be asked to support RTO incorporation of order info Assumes Complex firm has embedded SI, retail and corporate clients, and trades full product set Y Y N N N Y Y N Y Venues must report on behalf of participants who have no reporting obligation, eg non-eea entities CONFIDENTIAL 8 MARCH 2017 6
The Lightest Reporting Burden The HFT Firm Trading Day Close of Business T+1 Trades Back Office Systems ABIDE ARM NCA CONFIDENTIAL 8 MARCH 2017 7
A Day In The Life The Systematic Internaliser Trading Day Close of Business T+1 Quotes Trades Trade Details inc waivers Confirmations Reference IDs Nacks Back Office Systems Instrument Reference Data Transactions Confirmations Error Details MI Reports ABIDE ARM APA NCA CONFIDENTIAL 8 MARCH 2017 8
ISIN vs Non-ISIN Reporting No Field Name ISIN Product CFD 41 Instrument identification DE0009652388 code 42 Instrument full name CFD Vodafone 43 Instrument classification JESXCC 44 Notional currency 1 GBP 45 Notional currency 2 46 Price multiplier 1 47 Underlying instrument code GB00BH4HKS39 48 Underlying index name 49 Term of the underlying index 50 Option type 51 Strike price 52 Strike price currency 53 Option exercise style 54 Maturity date 55 Expiry date 56 Delivery type CASH CONFIDENTIAL 8 MARCH 2017 9
Personal Data Collection Which Data? Code Country Name 1st priority 2nd priority 3rd priority AT Austria CONCAT DE Germany FR France CONCAT Personal Identity Card Number (Personalausweisnummer) GB United Kingdom UK National Insurance number CONCAT GR Greece 10 DSS digit investor share CONCAT RO Romania National Identification Number (Cod Numeric Personal) SE Sweden Personal identity number CONCAT SI Slovenia Personal Identification Number (EMŠO: Enotna Matična Številka Občana) SK Slovakia Personal number (Rodné číslo) All other countries National Passport Number National Passport Number National Passport Number CONCAT National Passport Number CONCAT CONCAT CONCAT CONCAT CONFIDENTIAL 8 MARCH 2017 10
Personal Data Collection What Format? CONFIDENTIAL 8 MARCH 2017 11
RTO Considerations > Requires separate agreement for each trading partner > Requires firm cut-off time for receipt of order data > Needs agreed protocol/platform for submission of order data > Needs backup reporting pattern for non-receipt of data > Exposes client/staff personal data to additional disclosures > Does not reduce the client/staff data collection problem CONFIDENTIAL 8 MARCH 2017 12
RTO Use Case The Mother Hen Structure 2 Place order 3 Receive Fill Market 1 Basic order (Stock, Qty, B/S) Master Broker 7 Report 4 Pre-populate client app (economic fill details) ARM NCA Client Brokers 5 Insert RTO details (prior to cutoff) 6 Collect client details (NI nos, Short sale etc) CONFIDENTIAL 8 MARCH 2017 13
One to Many (INTC) Field Population > For one fill allocated to one fund INTC may not be used > For multiple fills allocated to one fund INTC may not be used (all fills reportable) > For one fill to multiple funds INTC may be used > For multiple fills to multiple funds INTC may be used > INTC must be flattened (by booking out to funds) on the same day > Average price may be confirmed for multiple fills to one fund, but fills must be reported CONFIDENTIAL 8 MARCH 2017 14
INTC Reporting One to Many Field No Field Name Market Side Trade Fund 1 Allocation Fund 2 Allocation 1 Report status NEWT NEWT NEWT 2 Transaction Reference Number 1286074 1286075 1286076 4 Executing entity identification 549300GK9KWVQKHQ5S16 549300GK9KWVQKHQ5S16 549300GK9KWVQKHQ5S16 code 5 Investment Firm covered by Directive 2004/39/EC or Directive 2014/65/EU TRUE TRUE TRUE 6 Submitting entity identification code 549300VLKO5CVMOT6C88 549300VLKO5CVMOT6C88 549300VLKO5CVMOT6C88 7 Buyer identification code INTC 213800NOEFELSI4HOJ60 213800NOEFELSI4HOJ60 8 Country of the branch for the GB GB GB buyer 12 Buy decision maker code 549300GK9KWVQKHQ5S16 549300GK9KWVQKHQ5S16 549300GK9KWVQKHQ5S16 16 Seller identification code 529900LN3S50JPU47S06 INTC INTC 17 Country of branch for the seller 21 Sell decision maker code CONFIDENTIAL 8 MARCH 2017 15
INTC Reporting Many to Many Scenario-Many fills by one counterparty for >1 fund Example: 900 qty, 2 fills by one counterparty, for 3 funds # Field Report 1 Report 2 Report 3 Report 4 Report 5 Report for aggregate for fill 1 Report for aggregate for fill 2 Report for fund 1 Report for fund 2 Report for fund 3 4 Executing entity LEI of IM LEI of IM LEI of IM LEI of IM LEI of IM 7 Buyer ID INTC INTC LEI of fund 1 LEI of fund 2 LEI of fund 3 16 Seller ID LEI of CP1 LEI of CP1 INTC INTC INTC 28 Trading date time 2016-03- 07T09:30:15.123 2016-03- 07T11:30:15.123 2016-03- 07T09:30:15.123 2016-03- 07T09:30:15.123 2016-03- 07T09:30:15.123 29 Trading capacity AOTC AOTC AOTC AOTC AOTC 30 Quantity 400 500 300 300 300 33 Price 25.50 25.90 25.72 25.72 25.72 36 Venue XOFF XOFF XOFF XOFF XOFF 16
Olivier HALIMI olivier.halimi@abide-financial.com +44 7595 536 255 Olivier BIRGEL olivier.birgel@abide-financial.com +33 6 44 10 31 23 abide-financial.com All information contained herein ( Information ) is for informational purposes only, is confidential and is the intellectual property of NEX Group plc and/or one of its group companies ( NEX ). The Information is directed to Eligible Counterparties and Professional Customers only and is not intended for Retail Clients (as each term is defined by the rules of the Financial Conduct Authority ("FCA")) or equivalent in a relevant jurisdiction. This Information is not, and should not be construed as, an offer or solicitation to sell or buy any product, investment, security or any other financial instrument or to participate in any particular trading strategy. The Information is not to be relied upon and is not warranted, either expressly or by implication, as to completeness, timeliness, accuracy, merchantability or fitness for any particular purpose. All representations and warranties are expressly disclaimed. Access to the Information by anyone other than the intended recipient is unauthorised and any disclosure, copying or redistribution is prohibited without NEX s prior written approval. If you receive this information in error, please immediately delete all copies of it and notify the sender. In no circumstances will NEX be liable for any indirect or direct loss, or consequential loss or damages including without limitation, loss of business or profits arising from the use of, any inability to use, or any inaccuracy in the Information. NEX and the NEX logo are trademarks of the NEX group. Certain NEX group companies are regulated by regulatory authorities. For further regulatory information, please see www.nex.com. NEX Group plc 2017