Free Site Registration

MiFID II Post-Mortem Cites Delays on LEIs and Data Quality as Key Challenge

Traders Magazine Online News, April 20, 2018

Ivy Schmerken

With the rollout of such a massive regulation as MiFID II, there are bound to be some hiccups, but so far firms are mainly wrestling with trade reporting and data quality issues.

That sentiment was expressed on a webinar hosted by A-Team Group,  MiFID II Trading Technology Requirements:  What Worked and What Hasn’t?, in which panelists aired their views on the most challenging aspects of the implementation and areas that need improvement.

In a poll taken during the A-Team’s post-MiFID II webinar the audience was asked which trading elements of MiFID II are going well: 38% said best execution, 23% algo trading, 40% communications recording, 35% time synchronization and 23% said nothing is working well.

Firms are focused on getting the regulatory pre-trade transparency reporting in place, along with post-trade reporting and best execution reporting, according to Thomas Kennedy, Global Head of Analtyics at Thomson Reuters.

In terms of trade reporting, “That has gone well, without major hiccups,” said Kennedy.  The Approved Publication Authorities (APAs) did a “pretty good” job of making their services available, said Kennedy. Many of the venues operate their own APAs so they can facilitate trade reporting for their clients.

“The challenge most firms are facing is how do they get data out of systems and figuring out issues with the reference data,” said Kennedy.

Under RTS 27, trading venues and systematic internalizers are obligated to submit reference data from Jan. 3 for the relevant financial instruments to national competent authorities (NCAs) who will subsequently transmit it to ESMA for publication.

On that front, ESMA’s Financial Instrument Reference Database or FIRDS did not come online until October of last year.

“Vendors and consumers of that content didn’t have much time to test and put controls on their systems,” Kennedy said.

While FIRDs is supposed to be a golden source of data, panelists said there is some inconsistency in the data.

ISINs and LEIs, Oh My

Venues and Systematic Internalisers (SIs) also had to request International Securities Identification Numbers or ISINs from FIRDS.

Citing a high volume of ISINs requested over the FIRDs database, Kennedy noted that 1.2 million ISINs were requested, representing a 70%-30% ratio split between venues and SIs requesting ISINs.  “Firms are trying to grapple with the reporting needs and taxonomy challenges that are mandated,“ he said.

Brokers also had to obtain legal entity codes for all of their clients, and trading venues had to get legal entity identifiers (LEIs) for each financial instrument traded on their venue. EU investment firms are required to identify each client with an LEI code.

“There are some firms that had to apply for an LEI that never had an LEI before,” said Kennedy. So, this is becoming kind of a task they have to manage that they didn’t have to do before,” he said.

For more information on related topics, visit the following channels:

Comments (0)

Add Your Comments:

You must be registered to post a comment.

Not Registered? Click here to register.

Already registered? Log in here.

Please note you must now log in with your email address and password.