mifid ii transparency and market data working group · best execution • data attributes mifid ii...

Manuel Alonso

Zurich, 25.10.2016

MiFID II – Transparency and Market Data Working Group

Financial Information Page 11/2/2016 2

• Introduction

• Transparency:

Pre-Trade

Post-Trade

• Market Structure

• Market Data Reporting:

Transaction reporting

Best execution

• Data Attributes MiFID II (see excel)

Financial Information Page 25.10.2016

MARKET DRIVER

Regulation Structure

3

Transparency Micro-structural

Issues Data Publication

and Access

Requirements

Trading Venues

Commodity

Derivatives

Transaction &

Reference data

reporting

Post-trade Issues

Investor

Protection

UCITS AIFMD PRIIP

/ KIID EMIR MAR FINFRAG

FIDLEG MiFIDII

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Financial Information Page 11/2/2016

MIFID II Enhanced Investor Protection Regulation Impact

4

Client Segmentation

• Retail / Professional /

Eligible Counterparty

(companies’ LEI,

domicile, sector codes)

• Financial situation

(income, assets,

liabilities)

• Investment objective

(investment horizon, risk

profile, ability to bear

losses, experience &

knowledge)

Advice / Sale

• Product Suitability,

appropriateness,

execution only (complex

/ non-complex

classification, target

market criteria, risk

indicators, product costs

• Product Intervention

• Product Documentation

(UCITS KIIDs PRIIPs

KID, Prospectus)

Order Execution

• Pre-trade transparency

(ESMA’s liquidity

assessment, trading

suspensions, waivers)

• Post-trade obligations

(Transaction reporting

(MIFID II reportable

instrument flag,

deferrals, instruments’

reference data)

• Best Trading Venue

Client Reporting

• Portfolio reporting

(market value, fair value,

benchmarks, interest

and dividends payments,

corporate actions)

• Leveraged instrument

indication

• Statement of assets

(MIFID II eligible

instruments)


MiFID II

Market Transparency Market Structure

Data Reporting Investor protection

Market Transparency & Market Structure


• requirements in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar

financial instruments (RTS 1) “equity-like instruments”

• requirements in respect of bonds, structured finance products, emission allowances and derivatives (RTS 2) “non-

equity-like instruments”

• Draft RTS on the volume cap mechanism and the provision of information for the purposes of transparency and

other calculations (RTS 3)

• Draft RTS on criteria for determining whether derivatives should be subject to the trading obligation (RTS 4)

• Draft RTS on criteria for determining whether derivatives have a direct, substantial and foreseeable effect within the

EU (RTS 5)

• Introduction of algorithmic trading rules and restrictive regime for high frequency trading

• Pre- and Post trading obligations on RMs, MTFs, OTFs, SIs and other investment firms trading in OTC financial

instruments

• Information must be available: 03.01.2017 – 01.01.2020 closer to real time and ≤ 15 minutes

After 01.01.2020 ≤ 5 minutes

Transparency


Pre-trade transparency

• Requirements for different types of trading systems, including order-book,

quote-driven, hybrid, periodic auction trading system, and for non-equity-like

instruments- voice trading systems.

• Waivers: a reference price waiver and negotiated price waver available.

Subject to a “volume cap mechanism”

• Liquidity:

for non-equity instruments: size-specific-to the-instrument “SSTI”

and Large-In-Scale “LIS”

for bonds: instrument-by-instrument-basis “IBIA”


Pre-trade Transparency

8

Trading Venue Waivers

RM

MTF

OTF

SI

OTC

Liquidity

Flag

No

Pre-trade

Transparency

SSTI - SSTI

threshold floor

- SSTI trade

percentile

LIS - Liquid

threshold floor

- Liquid trade

percentile

SSTI/LIS Illiquid threshold

floor/percentile

Disclosure

of bid/ask

prices and

size

Quotes on

client request

no pre-trade

transparency

trade

Financial Information Page 11/2/2016 9 11/2/2016 9

Post-trade transparency

• Requirements for operators of trading venues to make public the price,

volume and time of transaction as close to real-time as is technically

possible.

• Deferral: based on the size or type of the transaction. It may be authorized:

where transactions are large in scale compared with the normal

market for that instrument or class of instrument or

for non-equities illiquid instruments and transaction above a specified

size threshold that would expose liquidity providers to undue risk.

• Suspensions : NCAs may suspend the post-trade transparency obligation

for a non-equity instrument where the liquidity falls below the relevant

threshold.


Post-trade Transparency

10

Trading Venue No permanent waivers but

RM

MTF

OTF

SI

OTC

Liquidity

Flag

• ADNT

• ADNA

No

Post-trade

Transparency

LIS - Liquid

threshold floor

- Liquid trade

percentile

• AVT

• ADT

SSTI/LIS Illiquid threshold

deferral flag, source

Trade

reporting as

close to real

time as

possible

Deferred 48 hours to 3 months

trade

Financial Information /2/2016 11

• Mandatory position limits on commodity derivatives

• Introduction of organized trading facility (OTF) for non-equity instruments (RTS 7)

• Limitation on trading outside regulated markets (e.g., dark pools)

• Introduction of algorithmic trading rules and restrictive regime for high frequency trading (RTS 6, 7)

• Draft RTS on the tick size regime for shares, depositary receipts and exchange traded funds (RTS 11)

Market Structure


Market Structure

12

• Multilateral trading

• Non-equity


• Equity and non- equity trading


• Equity and non- equity trading

• Bilateral trading

• Equity and non-equity trading

Regulated

Markets (RM)

Multilateral

Trading Facility

(MTF)

Organized

Trading Facility

(OTF)

Systematic

Internalizer (SI)

MIC Operating/Segment

Trading interruptions

Trading suspensions

Listing Status

Price – intra day

Price daily

SI Registered Flag

SI Effective Date

new

Over-the-counter

(OTC)

• Bilateral trading

• Equity and non-equity trading


• on reporting obligations under Article 26 of MiFIR (RTS 22)

Client reporting requirements for all asset classes

• on supply of financial instruments reference data under Article 27 of MiFIR (RTS 23)

• on the maintenance of relevant data relating to orders in financial instruments (RTS 24) [Art 25(3) MiFIR]

• on clock synchronization (RTS 25)

Level of accuracy of business clocks

• Yearly report of Top 5-trading venues

Market Data Reporting


Transaction Reporting

14

Examples:

• MIFID II In-Scope / Eligible

• Reportable instrument Flag

• Instrument Identifiers and

classification

• Instrument Reference Data

• Underlying Instrument

• etc.

• Reporting Entity

• Buyers Details

• Seller Details

• Order Transmission

• Transaction Details

• Instrument Details

• Other relevant

Information

Our expected Offering

Requirements

Financial Information Page

• Quarterly report by trading

venues (RM; MTF, OTFs and

SIs) related to execution quality

that take into consideration

price, costs, speed and

likelihood of execution for each

instrument)

• Annual reports by investment

firms to their clients with their

top 5 execution venues along

with specific data relating to the

quality of execution

11/2/2016

Best Execution

17

Requirements

Examples:

• Average Trade Size

• Average Executable Size

• Average Spread

• Best Trading Venue (BTV)

• Tick size

• etc.

Our expected Offering


Thank you for your attention!

Financial Information Page

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11/2/2016

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