ESMA seemingly delivered a double whammy on 4 February with the publication of Q&As for both MiFIR and EMIR data reporting. However, there’s nothing to get too excited about, although firms do need to understand the ‘clarification’ and adjust their reporting accordingly.
Impact on MiFIR data reporting
Bit of a damp squib. There is only one question that relates to transaction reporting (TVTIC on complex trades); the others all relate to RTS 23/MAR reference data reporting. The clarifications can be summarised as follows (italics indicate direct quote from the Q&A):
How should the TVTIC (field 3 of RTS 22) be populated in transaction reports of a complex trade?
Bit of a change here. Previously, firms were required to put the same TVTIC on each leg of the reported trades (if they were traded on a trading venue). New instruction is to use the TVTIC provided by trading venue for each leg of the complex trade (where the trading venue uses multiple TVTICs)
How should Field 15 (Maturity date) of Table 3 of the Annex to RTS 23 and related MAR RTS and ITS be populated in case of trading in bonds after their originally intended maturity date?
“For bonds that were not paid out on the originally intended maturity date (and therefore have not expired, because, for example, they defaulted), the maturity date should be set to 9999- 12-31 …until they are finally paid out, in which case the maturity date should be updated with the actual date of redemption”.
How should field 15 (maturity date) and field 24 (expiry date) of Table 3 of the Annex to RTS 23 and related MAR RTS and ITS be populated, if these dates are non-trading dates, e.g. a weekend or a bank holiday?
“The maturity date/expiry date defined by the issuer or the prospectus of the financial instrument should be used. No adjustment should be made to the next or previous working day for the purpose of instrument reference data reporting.”
When should an instrument be terminated in FIRDS?
“When field 12 (termination date) of Table 3 of the Annex to RTS 23 and related MAR RTS and ITS is initially left empty, the reporting entity is expected to fill it in when the instrument is going to be terminated. This also includes the cases when the given instrument has matured/expired, i.e. where fields 15 (maturity date) or 24 (expiry date) are applicable to the given instrument and are populated in the report.
The termination date should be earlier than or equal to the maturity/expiry date in the cases where the maturity/expiry date is populated.”
(RTS 23)What action should be taken by the operator of the trading venue or the systematic internaliser in the cases where the LEI of the issuer cannot be obtained?
Tell the issuer that they should get an LEI (!!!).
Impact on EMIR Data Reporting
There are only three clarifications in the EMIR data reporting Q&A – the first two are amendments to previous trade reporting questions whilst the third is a brand new question:
Q34 – Reporting of contracts with no maturity date (e.g. CFDs);
ESMA simply reminds firms that they can also report new trades for instruments with no maturity date with an ‘Action Type’ of ‘P’ (“position component”) if it is to be included in a position level report on the same day. This is in line with previous comments from ESMA.
Q38 – Trades terminated before the reporting deadline
All trades must be reported even if they are terminated before the reporting deadline and ESMA is simply clarifying that these reports could also be made with an Action Type of ‘P’ if the trade is to be included in a position level report, on the same day.
Q50 – Reporting of Confirmation Means
The value ‘N’ (not confirmed) should be used either when:
- The derivative has to be confirmed by the counterparties but has not been confirmed yet;
- The derivative does not have to be confirmed by the counterparties because it has been traded on a trading venue and once traded all the terms of the contracts are known and agreed by the parties.
In other cases, the counterparties should report the ‘E’ or ‘Y’ value for this field depending on the confirmation means used (electronic or non-electronic).
I think this is the one element in the new Q&As that may surprise some firms as it clearly states that trades on a trading venue should have a value of ‘N’.
So, not a lot really going on with the new Q&As. It is tempting to think that little news is good news. Personally, I don’t subscribe to this point of view; I think there is still plenty of grey in there that would benefit from further clarification, which is natural given the fundamental changes brought in by MiFIR. I also think there are a few elements in the Guidelines that, with hindsight, could have been better – (equity swaps is my favourite bugbear today).
If you have a burning MiFIR or EMIR reporting question keeping you awake at night, why not contact us at Kaizen.