ESMA gets in just before Santa to consult on clocks, data, records and reporting under MIFID II

santa hat

ESMA’s consultation paper on some MIFIR/MIFID II guidelines were delivered, as promised, before Rudolph had his harness fitted. Well… just about.

Those still at their desks on 23 December were left scratching the heads on whether they had been naughty or nice as they began to pore over 269 pages of guidelines on transaction reporting, reference data, order keeping and clock synchronization

You may be relieved to hear that we will not be going through all 269 pages in detail in this blog (and there’ll be no more Santa related puns). Instead we look to set this document in context, explore its usefulness, its purpose, and briefly summarise the structure and content.


The publication of the consultation paper continues the exercise of adding further granularity to the obligations required under MIFID II/MIFIR and then built upon under ESMA Regulatory Technical Standards (RTS) 22, 23, 24 and 25.  On page 7 of the consultation paper ESMA explains that:

“…this guidance complements the technical standards and will be essential for the consistent implementation of the new MiFIR rules.”

Are they useful?

Considering the already published details under the directive, regulation, and RTS, it is valid to ask whether further granularity and detail is required. It’s worth considering the guidance provided by ESMA to market participants who have to meet EMIR reporting obligations. Under EMIR, guidance was provided in a piecemeal ad-hoc fashion. Guidelines were not drafted and published for consultation, clarifications were instead conveyed via a ‘Question and Answers’ document. For those who have Dodd Frank Reporting (DFA) obligations (under Chapter 17 part 43, 45 and 46) no further guidance other than the regulation was provided. So seen in this light – having well thought out, structured, and consulted upon guidelines should give firms a greater chance of delivering increased quality and consistency of reporting.

Regulators’ expectations

The regulators who drafted this consultation document have the experience of reporting under MIFID and as a result, the standards of the RTS and now these guidelines are more informed, detailed, and consistent than compared to EMIR.  Therefore there will be a greater expectation that the quality of MiFIR reporting will be high from the beginning. To increase the likelihood of the guidelines being successful ESMA will consider all comments received by 23 March 2016. Having guidelines that have been written by regulators with previous experience and consulted upon with market participants – combined with a potential year’s delay to MIFID II – gives the best chance of correct reporting than any of the recently introduced reporting obligations such as EMIR and DFA.

Structure and content

The guidelines’ length of 269 pages may make it feel impenetrable and inaccessible but on close inspection this is not the case. While there are four issues covered in this document – transaction reporting, reference data, order record keeping and clock synchronization – here we just review the transaction reporting section, which takes up 193 of the 264 pages and is made up of four parts.

  • Part I: General Principles
    Includes guidance on the how, what, when, where to send reports and exclusions.
  • Part II: Blocks (not to be confused with block trades!)
    A block is a collection of fields, which relate to a particular topic and there are 12 blocks in total. For example, block 1 deals with buyer/seller identification, block 4 deals with execution time within the firm and block 10 branches.
  • Part III: Scenarios
    Outlines different trading scenarios that a reporting party may encounter. For example, transmissions of orders, grouped orders, provision of direct electronic access.
  • Part IV: Instruments
    Offers clarity on what instrument data is required to be populated on reports. Focusing primarily on derivatives, this section prescribes when an ISIN is applicable versus when characteristics of the instrument are required.

In each of the four sections ESMA attempts to provide clear notes on guidance backed up by an example and then an outline of what is expected to be included in the report. It is worth noting that two thirds of the nearly 200 pages on transaction reporting are made up of examples of how the report should be reported.

Welcome step, but…

The guidelines and the opportunity for the industry to provide feedback is a very welcome step. Taken together with the MiFID II/R RTS and the now likely year delay, the industry has the materials at its disposal for introducing high quality reporting on go-live. Though I do have a note of caution for firms: ESMA and the competent authorities’ expectations will be high and individuals under the senior managers regime (coming into effect in quarter 1 next year) will be held to account for any failings.

Over the coming weeks and months we will explore in more detail the effects and implications of guidelines so keep an eye out and feel free to raise questions or comments either to me ( via Linkedin or Twitter. Happy New Year from all of us at Kaizen!