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MiFID II REPORTING

Overview

This documents provide an overview of Kooltra's MiFID II Reporting Process. A revamped version of the Markets in Financial Instruments Directive, or MiFID II, is designed to offer greater protection for investors and inject more transparency in all asset classes: from equities, to fixed income, exchange traded funds and foreign exchange across the European Union (EU). MiFID was reviewed by arms of the European Union from 2010 to 2014, and a revised regulation called MiFID II passed the European Parliament in 2014 (click here to read more). Kooltra provides MiFID II ARM reporting via the NEX Regulatory Reporting platform (http://www.nexregreporting.com/), which is powered by Abide Financial.

The MiFID II app is installed and configured on a per entity basis. It is assumed that an entity is a separate legally from all other entities and therefore has its own LEI and reporting obligation. 

Prerequisites

i. Entity

In order for the MiFID App to report trades successfully, the entity for which it is reporting on behalf of must have:

  1. The Legal Entity Identifier (LEI)

ii. Counterparties

In order for the MiFID II App to report trades successfully, the account for which it is reporting must have:

  1. A primary contact person - for Counterparty type "Individual"
    1. Full legal name
    2. Date of Birth
    3. Identification Type and Number
  2. The Legal Entity Identifier (LEI) - for all Counterparties not marked as Individual

Reportable Trades

According to Transaction Reporting - What is Changing Under MiFID II published by ACA Compliance Europe, MiFID II redefines the scope of transaction reporting to capture:

  1. Financial instruments admitted to trading or traded on an EU trading venue or for which a request for admission has been made.
  2. Financial instruments where the underlying instrument is traded on a trading venue.
  3. Financial instruments where the underlying is an index or a basket composed of instruments traded on a trading venue.

As a result, the Contract for Difference (CFD) trades processed by Kooltra are required to be reported and are reported automatically using the MiFID II App. 

MiFIDReporting

To Enable the MiFID II App

  1. Ensure that you are in the correct entity. Entities can be changed by clicking on the entity name at the bottom of the navigation pane and selecting an entity from the list that appears.
  2. Navigate to System > Entity Settings in the Navigation Pane.
  3. In the top menu bar of the Entity Settings page, click on the Apps tab.
  4. Find the MiFIDTwo App and enable it by cicking on the toggle. 
  5. Specify the excluded instruments if applicable. This currency pair will then be omitted from reporting to Abide.
  6. Specify if you would like to have the trade reference number encoded*. If checked, the trades in the MiFID file will show the encoded reference number.
EnableMiFID

*Encode Trade Reference Number

The encoding option allows users to decide whether the trade reference number will be encoded when the the trades are reported in a file. If the box is checked, the transactions in the MiFID file will show the encoded reference number.

In some scenarios, encoding the Trade Reference Number is mandatory when your trade ID includes special charaters, which are not recognized or accepted by the regulatory body. As shown below, the encoding process will transform the transaction ID using base16 method to strip out special charaters while retaining the orginal transaction ID.

Unencoded Trade Reference Number:

Unencoded.png

Encoded Trade Reference Number:

Encoded.png

MiFID II Scheduling

Once you have completed the entity and counterparty setup, you may start importing CFD trades using Kooltra API. (Note that importing trades using the CFD Single/Double Leg entry page will not be processed by MiFID II App as there will be no External ID populated).

Considering the nature and requirements of MiFID II reporting, Kooltra allows users to select the daily run time on Compliance > MiFID Two Config. The time imputed needs to be in HH:MM format. In the following example, we scheduled MiFID to be run at 13:30 every day. 

Scheduling Mifid.gif

You can read more about scheduling a MiFID job and getting a response from Abide by clicking the MiFID2 Config guide. 

MiFID Error and Resubmission

In some scenarios, transactions may not be processed or accepted by Abide resulting an unsuccessful submission and an error. In this case, you are able to view the error details by navigating to the Outbound Message page. Kooltra allows users to retry sending MiFID reports in Outbound Messages. 

You can view more details about the Outbound Message here.

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MiFID II, regulatory reporting, ABIDE, EU, European Union Compliance