Where the firm provides Direct Market Access (DMA) or Sponsored access (sometimes referred to as Direct Electronic Access (DEA)) facilities to its clients transaction reports must be made in respect of the DMA trades undertaken.
15.1. Reporting DEA market facing trades
Each market fill should be reported by the firm identifying the venue and the central counterparty to the trade where the firm is using its membership of the market to trade
Where the firm is using the facilities of another broker to gain access to a market, the broker should be reported rather than the central counterparty for that market.
15.2. Reporting DEA client facing trades
Trades back to clients can be either:
- at the end of the day when reporting the allocations to the clients. These provide a single trade by client by trade direction (i.e. buys and sells are not netted)
- at each point a market fill is achieved for the client. These are therefore transaction reported with the same time and quantity as the market fills
15.3. Where the firm accesses markets using a third party’s facilities
There may be circumstances in which the firm uses another broker’s facilities to obtain access to a market. In such situations the firm is the DMA client and a transaction reporting obligation arises on the firm. Where this arises, the firm must transaction report. Our approach is to report each individual fill based on the FIX messages (which commit the firm to the trade) received from the DMA broker irrespective of when the broker allocates the trades to the firm within its own books. We also treat each DMA trade as being on exchange as we know the venue of execution and the trades must be executed in conformance to the rules of that exchange. For non UK exchanges there isn’t always the same concept of on and off exchange. Therefore, where the broker agreements are unclear, these trades should be reported as on-exchange unless we cannot be certain of the place of execution. Typically this will be in relation to high touch trading where the firm’s broker may fill the order from their own book or across multiple venues and provide the firm with a single fill.
To help ensure there is legal clarity as to how and when a DMA trade takes place the terms of the broker agreement with the DMA service provide should specify:
- when transactions are deemed to have taken place (for each fill or at end of day);
- it should also specify whether the trades with the firm will be executed under the rules of the exchange or will be principal trades with the broker and therefore XOFF; and
- ensure that buys and sells are not netted
15.4. DEA reporting at average price
Where there is an agreement in place with the client to fill trades at an average price, a single transaction report can be submitted showing the total quantity at the average price. The trade time should be the time of the last fill as this reflects the time of transfer of beneficial ownership. Again the venue should normally XOFF unless it has been agreed with the client it will be conducted under the rules of the relevant exchange whereupon the exchange MIC code should be reported.
15.5. DEA reporting what not to do
As mentioned above, transaction reports reflect the transfer of beneficial ownership to the client. As such, buy and sell trades should not be netted nor an average price used unless this reflects the transfer of beneficial ownership.
Settlement and client confirmations are independent of transaction reporting. Therefore, if a client requests a single end of day confirmation this will not affect the transaction reports required to be made.