- 14.1. ETD instruments in scope
- 14.2. Receipt and transmission of orders
- 14.3. Instrument identifiers for ETDs
- 14.4. Components of the Alternative Instrument Identifier (Aii) code
- 14.5. ETD Reference data
- 14.6. Derivative transactions conducted through clearing platforms
- 14.7. MEFF flex derivatives
- 14.8. LIFFE Central Counterparty
- 14.9. LIFFE transaction reporting feed to the FCA
- 14.10. Euronext derivatives trading
14.1. ETD instruments in scope
There are a number of futures exchanges which are regulated markets. All instruments admitted to trading on options and futures exchanges which are regulated markets within the EU are reportable. There is an exception for commodity, interest rate and FX derivatives as these are reported directly by the exchanges themselves, as set out in section 4.2.
Futures and options admitted to trading on a futures exchange are instruments in their own right. Therefore their reportability is based only on whether the market on which they are traded is a regulated market or not. You only need to consider the underlying to assess if the instrument is exempted as an interest rate, commodity or FX derivative. This also means that any ETD instruments traded on non-regulated markets are not reportable irrespective of their underlying. For example, Vodafone options listed on the Philadelphia exchange are not reportable even though the underlying equity is admitted to trading on a regulated market.
14.2. Receipt and transmission of orders
It is possible for a firm to pass an order it has received from a client to another broker for execution. This is a common practice for ETDs. Where an order is received and then passed to another broker for execution this is known as the receipt and transmission of an order or “RTO”.This is not a transaction as defined by MiFID Article 2 as it is not a purchase or sell of a financial instrument
14.2.1. Full service trades
The firm transmitting the order for execution can pass on the order as a full service order, where both the execution and clearing will be handled by the receiving broker.
14.2.2. Execution only trades
RTOs often arise where the transmitter (the party passing on the client order to a third party broker) does not have membership of the particular exchange on which their client wishes to trade. Another scenario is when the transmitter does not have the capacity to properly execute the trade. In such circumstances the transmitter will pass an order to a broker for execution only, with the trade being “given up” for clearing to another broker.
14.3. Instrument identifiers for ETDs
To enable regulators to identify each instrument being reported and consequently the features of each instrument, maturity date, strike price, underlying etc. a key is required to uniquely identify the instrument.
ISIN codes are used to uniquely identify equity and debt instruments however, the Aii code was introduced specifically for certain derivative markets. These markets claimed that ISINs were impractical for their markets due to the cost of their issue and the fact that often they admitted to trading on their central order book new instruments intra day. They therefore could not wait for ISINs to be allocated for such instruments.
The current Aii markets are listed below:Instruments admitted to XEUC are reported directly by the exchange to its regulator and are not reportableInstruments admitted to XEUI are reported directly by the exchange to its regulator and are not reportable
14.4. Components of the Alternative Instrument Identifier (Aii) code
- ISO 10383 Market Identifier Code (MIC) of the regulated market where the derivative is traded
- Exchange Product Code – the code assigned to the derivative contract by the regulated market where it is traded
- Derivative Type – identifying whether the derivative is an option or a future
- Put/Call Identifier – mandatory where the derivative is an option
- Expiry Date – exercise date/maturity date of the derivative
- Strike Price – mandatory where the derivative is an option
14.5. ETD Reference data
All transactions in Aii instruments are reported through Ransys which has access to static data maintained by ION trading who operate the Ransys system.
The exchange product codes are sourced directly from the exchanges.
14.6. Derivative transactions conducted through clearing platforms
Derivatives exchanges often provide a clearing service which allows member firms to undertake bilateral trades in derivatives. Some such trades are large in size but are in instruments that are traded on the central order-book. These are termed fungible instruments. Others have features such as maturity date and strike price that are unique. As such the resultant instruments are not fungible with those that trade on the exchanges central order-book. Often these are termed FLEX instruments.
FCA has provided guidance on how to report such instruments. FCA view these instruments as being on exchange trades irrespective of how the trade was arrived at. Broadly, the following must be applied:
Venue ID will be the platform provider’s MIC code
Where you are trading using your exchange membership, the trade will be reported as being executed with a central counterparty rather than the original party to the trade (the CCP positions itself as the counterparty in such trades taking on the counterparty risk). The BIC of the CCP must be used.
Other details of the trade such as strike price, maturity date, put/call are to be submitted as normal.
14.7. MEFF flex derivatives
The exception to this are flex derivatives cleared through MEFF the Spanish derivative exchange. The Spanish regulator (CNMV) has stated that these are not on-exchange instruments and should be reported as OTC instruments.David Nowell, Transaction Reporting Forum, 24 April 2012 The table below sets out what is required for a sample of clearing platforms:
14.8. LIFFE Central Counterparty
The central counterparty on LIFFE has changed a number of times over the years following changes in its ownership. Care must be taken to ensure the correct is reported for LIFFE trades particularly when back reporting historic trades. The current CCP is ICEClear which became the CCP in July 2013.
Prior to ICEClear, the CCP was NYSE LIFFE Clear which became the CCP in 2009 ahead of Aii reporting go live. The clearing services for LIFFE were however outsourced to LCH, Clearnet Limited. As such all margin and settlement continued to be with LCH but for transaction reporting purposes “NYXLGB21XXX”, the BIC of NYSE LIFFE Clear, should have been reported until July 2013.
The table below shows the appropriate CCP for LIFFE trades based upon the trade date:
14.9. LIFFE transaction reporting feed to the FCA
LIFFE provides a feed of all on market facing transactions to the FCA. Firms can place reliance on this feed for their market side transactions if they so wish. To do so they must formally notify the FCA. If reliance is placed on the LIFFE feed, care must be taken to ensure that branches within Europe of the reporting entity do not use the same LIFFE membership reference for branch trades as these are reportable to the host Competent Authority and would result in double reporting once to the FCA and once to the host Competent Authority.
The firm reports all its LIFFE transactions directly and does not place reliance on the LIFFE feed.
14.10. Euronext derivatives trading
There has been some confusion regarding Euronext XMAT instruments. Historically XMAT listed some CAC 40 index and equity derivatives. The two markets were merged and nearly all instruments on XMAT were retired or moved to XMON or XEUE. The only instruments currently traded on XMAT are:
1. Paris Commodity Derivatives:
2. Amsterdam Commodity Derivatives:
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|1.||↑||This is not a transaction as defined by MiFID Article 2 as it is not a purchase or sell of a financial instrument|
|2.||↑||Instruments admitted to XEUC are reported directly by the exchange to its regulator and are not reportable|
|3.||↑||Instruments admitted to XEUI are reported directly by the exchange to its regulator and are not reportable|
|4.||↑||Alternative Instrument Identifiers | FCA|
|5.||↑||David Nowell, Transaction Reporting Forum, 24 April 2012|