Q – Who should read the latest MiFIR Q&A?

Who should read the latest MiFIR Q&A?

A – Those involved in: portfolio management outsourcing, IPOs, corporate actions and trading of swaps which contain an index.

ESMA has published its latest version of its Questions and Answers on MiFIR with updates exclusively on the topic of firms’ transaction reporting obligations under MiFIR article 26 and ESMA RTS 22. There are four questions raised, each marked with the update date of 14 November 2017.  Here we briefly explore the key points of each question and answer.

Q7: How should transactions be transaction reported where portfolio management has been outsourced? (page 33)

ESMA provides a new detailed scenario and answer to the question in the form of diagrams, example reports and narrative explanation. In this scenario, where firm (B) is outsourcing the portfolio management to another firm (Z), who is making the investment decisions on behalf of firm (B), ESMA confirms that firm B needs to report the algo or person who is primarily responsible for the decision to delegate.

Q8: What are the reporting obligations for a primary issuance?

ESMA has confirmed that all members of a syndicate need to report all execution legs by the ‘coordinating bank’ (CB) and the ‘billing and delivery bank(s) (B&D).  A CB is defined as a bank that will buy from the issuer/seller and sell to another bank or banks in the syndicate. A B&D bank will then sell to the clients, noting that a CB can also act as a BD. In relation to the time that needs to be reported, this should be the date time at which the pricing and the allocations are finalised between issuer and the syndicate, normally the first listing. ESMA has provided worked out examples for other fields.

Q9: When are corporate events reportable?

The industry is going to have to pick through the answers to question 9. ESMA reiterates that corporate actions are reportable where the investor has an opportunity to make an investment decision. It then goes on to recognise in practice that many corporate actions are as a result of mandatory events that bring them within the exclusions under 2(5)(i) of Article 26. This still leaves an element of interpretation on behalf of firms to identify these exclusions.  There is clear guidance on corporate events resulting from a default option and where an investor has given standing instruction.  For both categories a report is required.

ESMA also confirms that it is the transaction resulting from the event that should be reported and provides a worked example. There are other points to review but in short and at first glance, this guidance reiterates that firms will need to put in place measures to identify reportable corporate actions.

Q10: Are both legs of a swap reportable, when one leg contains an index such as LIBOR or EURIBOR?

I think the answer simply says ‘look at example 106 in section 5:35.7.1’ but uses many more words than that to say this!

The main purpose of this blog was to draw your attention to the latest Q&A and to highlight some of the key points. In terms of readiness for 3 January, I think the most significant impact will be the reporting of corporate actions and firms’ ability and capacity to separate those that are reportable from those that are not.