MiFIR transaction reporting goalposts set to shift again

Whilst it may be a bit more of a tweak than a wholesale change, firms need to be aware and plan for changes to the ESMA validations that are targeted to come into effect on 23 September this year. 

The changes were agreed back in July 2018 but delayed by the Brexit postponement and are mainly amendments to cover mistakes in the validation previously introduced. The changes, cut and pasted from the ESMA version history, are as follows:

  • rule id 010: field 3 must not be populated. This also pertains to SIs;
  • rule id 014: add provision for the case when an LEI is in the “Lapsed” status for a certain period;
  • rule id 096: validation of field 28 against the reception timestamp;
  • rule id 117: field 37 not mandatory for SIs;
  • rule id 136: check against additional CFI codes;
  • rule id 154: check against additional CFI codes;
  • rule id 227: correction of a typo in one of the CFI codes.
  • Clarified description of rules 228 and 267.

For me, the most important of these changes is the change to Rule 117.  From the implementation of this change, firms should no longer populate ‘Country of branch membership’ for trades against systematic internalisers. Of course, this field should never have been populated for trades against systematic internalisers in the first place as this contravenes the Regulatory Technical Standards (“This field shall only be populated for the market side of a transaction executed on a trading venue or on an organised trading platform outside of the Union.”). I think it is important to highlight that this oversight has forced firms to make an error in their transaction reports in order for them to be accepted by the NCAs.

I don’t wish to criticise the regulators for making errors, as I believe it is inevitable that there will be some initial errors in the implementation of such a complex regulatory reporting regime – for both regulators and firms. However this issue clearly raises the question about whether the NCA would expect every firm to submit a form when they are forced to report incorrectly in order for the NCA to accept the report. There has to be a degree of common sense and this is not reflected in the wording of Market Watch 59.

It is also fair to say the changes have not been widely publicised. ESMA has made a notification of changes but I’m sure most people, like me, will find this notification extremely difficult to understand. I’m sure people will also be confused by the validation version history that still states that the changes were “applicable from the end of 2018”. Perhaps the FCA is waiting for more confidence in the 23 September implementation date before it makes an announcement. However, whilst these changes aren’t major, firms need time to assess the changes, code and test any required system changes. September 23 already appears very close.

Kaizen will of course be updating our ReportShield testing to include the latest validation changes in time for September 23. We provide validations as part of our accuracy testing service at no extra charge to clients – saving significant costs in avoiding outsourcing an additional validations service. Please contact us for a discussion with one of our regulatory experts to find out more.