14. Reporting Exchange Traded Derivatives (ETDs)

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”.[1]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.

Under the agreement with CESR, each derivative market must elect to be either an ISIN or an Aii market. The list of markets and their selected identifiers can be found on the ESMA database.

The current Aii markets are listed below:[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

MIC Full name Identifier Country Authority
MFOX NYSE Euronext - Mercado De Futuros E Opcoes Aii PT CMVM
NDEX European Energy Derivatives Exchange N.V. Aii NL AFM
XADE Athens Exchange Derivatives Market Aii GR HCMC
XBRD LIFFE Brussels Aii BE CBFA
XEUC Euronext COM - commodities futures and options Aii NL AFM
EUE Euronext EQF - equities and indices derivatives Aii NL AFM
XEUI Euronext IRF - interest rate future and options Aii NL AFM
XEUR Eurex Deutschland Aii DE BAFIN
IFLL ICE Futures Europe - Financial Products Division Aii GB FCA
IFLO ICE Futures Europe - Equity Products Division Aii GB FCA
XMAT Euronex Paris MATIF Aii FR AFM
CMED CME EUROPE LIMITED Aii GB FCA

14.4. Components of the Alternative Instrument Identifier (Aii) code

The Aii code is comprised of six elements that together uniquely identify an instrument. The six elements are:[4]Alternative Instrument Identifiers | FCA

  1. ISO 10383 Market Identifier Code (MIC) of the regulated market where the derivative is traded
  2. Exchange Product Code – the code assigned to the derivative contract by the regulated market where it is traded
  3. Derivative Type – identifying whether the derivative is an option or a future
  4. Put/Call Identifier – mandatory where the derivative is an option
  5. Expiry Date – exercise date/maturity date of the derivative
  6. 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:

The instrument identifier must be either an Aii or ISIN dependent on the platform

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.[5]David Nowell, Transaction Reporting Forum, 24 April 2012 The table below sets out what is required for a sample of clearing platforms:

Platform Instrument identifier Market side Venue ID Counterparty 1 Date and time Type Client side Venue ID Validation issue
BClear Aii XLIF CCP: ICEUGB2LXXX When accepted by clearing platform Fungible & non-fungible XLIF Validation as normal
Turquoise ISIN LOND CCP: LCHLGB2LXXX When accepted by clearing platform Fungible & non-fungible XOFF Validation as normal
Eurex Aii XEUR CCP: EUXCDEFF XXX When accepted by clearing platform Fungible & non-fungible XEUR Validation as normal
MEFF Blank

Underlying instrument identifier must be completed
XXXX BIC or FRN of the counterparty or internal code where these are not available

BME clearing: MEFEESB1XXX
Time the contract is agreed between the parties. Non-fungible/ FLEX only XXXX As normal

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:

Clearer CCP BIC code Effective from Effective to Notes
LCH.Clearnet Ltd LCHLGB2LXXX Nov 5 2007 July 2009 Voluntary Aii reporting was in place from MiFID go live on 5 Nov 2007
NYSELIFFE NYXLGB21XXX July 2009 July 2013 Aii go-live date Nov 2009
ICEClear ICEUGB2LXXX July 2013 onwards -

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: 
 

Detail Value
Exchange Code Y
Exchange Name Euronext Paris - Commodity Derivatives
Exchange Short Name PCOM
RLC Group 72
RLC Subgroup 00
Clearing Organisation MATIF
Market ID 276
Market Place ID 025
MIC Code XMAT
Product Family MATIF Commodities
 
2. Amsterdam Commodity Derivatives:

Detail Value
Exchange Code R
Exchange Name Euronext Amsterdam - Commodity Derivatives
Exchange Short Name ACOM
RLC Group 75
RLC Subgroup 00
Clearing Organisation MATIF
Market ID 276
Market Place ID 037
MIC Code XEUC
Product Family MATIF Commodities

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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