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EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/5.VII.4.3
5.VII.4.3 Assessment of the ESMA IT Systems (FIRDS/FITRS)
mr. J.E.C. Gulyás, datum 01-02-2021
- Datum
01-02-2021
- Auteur
mr. J.E.C. Gulyás
- JCDI
JCDI:ADS266425:1
- Vakgebied(en)
Financieel recht / Bank- en effectenrecht
Financieel recht / Europees financieel recht
Financiële dienstverlening / Financieel toezicht
Voetnoten
Voetnoten
ESMA, MiFID II/MiFIR Review Report: on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligations for shares, 16 July 2020(ESMA70-156-2682), p. 48.
The ESMA consultation does not address the situation of Brexit in relation to FIRDS/FITRS. ESMA does address the issue in an opinion. For an examination, reference is made to section VI above.
ESMA, MiFID II/MiFIR Review Report no 1, December 2019(ESMA70-156-1606), p 42.
A-Team Insight, ‘MiFID II Data Management: Where Are We Now?’, 25 April 2018 (available at: https://a-teaminsight.com/mifid-ii-data-management-where-are-we-now/?brand=tti). See also more broadly, German Ministry of Finance, ‘Necessary amendments and revisions to secondary market provisions in MiFID and MiFIR’, 2019, p. 2. and (FESE, Input on the Functioning of the ESMA Database, December 2019, p. 1-2).
For example, one market participant identifies issues with the classification of financial instruments (the so-called CFI codes) to determine the type of instrument applicable requirements (e.g. no clear rules for assigning CFI codes, resulting in different approaches (FESE, Input on the Functioning of the ESMA Database, December 2019, p. 1-2 (available at: https://fese.eu/app/uploads/2019/07/190709-FESE-Input-on-the-Functioning-of-the-ESMA-Database.pdf)). Another example of a reference data issue identified by FESE is where a financial instrument is available for trading on multiple markets and one of these reports incomplete reference data, the files from other reporting entities are rejected as well, even though these reports are accurate and timely (ibid).
ESMA, MiFID II/MiFIR Review Report No. 1, December 2019 (ESMA7-156-1606), p 42. One issue identified by the same market participants is that the systems of FIRDS and FITRS do not immediately notify the reporting entity (e.g. an RM or MTF) whether the data reported is accepted by FIRDS/FITRS (sometimes only after a few days). This is problematic for certain reporting entities that have built verification processes to verify the reported data, provided acceptance (or rejection) is received within 24 hours (FESE, Input on the Functioning of the ESMA Database, December 2019, p. 1-2).
FCA (Financial Conduct Authority), Market Watch: Newsletter on market conduct and transaction reporting issues, November 2017, p. 2.
ESMA, Consultation Paper: MiFID II/MiFIR review report on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligations for shares 4 February 2020 (ESMA70-156-2188), p. 13, p. 29, and p. 33. See also AFME, Reply form for the Consultation Paper on MiFID II/MiFIR review report on the transparency regime for equity and equity-like instruments, the DVC and the trading obligations for shares, 4 February 2020, p. 8 and p. 15.
ESMA, Consultation Paper: MiFID II/MiFIR review report on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligations for shares 4 February 2020 (ESMA70-156-2188), p. 33.
ESMA, MiFID II/MiFIR Review Report: on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligations for shares, 16 July 2020(ESMA70-156-2682), p. 13.
ESMA, Consultation Paper: MiFID II/MiFIR review report on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligations for shares 4 February 2020 (ESMA70-156-2188), p. 36.
An element of the ESMA MiFID II Review concerns the ESMA IT systems (FIRDS/FITRS). ESMA proposes the following in the context of FITRS:
Change the reporting requirements to FITRS in order to be able to collect the trading volumes executed per waiver type and not in aggregated form.1
ESMA does not propose any changes in the context of FIRDS (reference data database). The ESMA proposal is the result of the ESMA consultation, including feedback from respondents. Both market participants and ESMA identify issues with the ESMA IT systems.2 Market participants emphasize that, while progress has been made, there is a lack of a centralised ‘golden source’ for reference data to classify financial instruments correctly and determine the applicable reporting requirements.3 Although it was never the intention of ESMA to make FIRDS (ESMA database for reference data) a ‘golden source’ of reference data, many market participants believe the data in FIRDS ‘is absolutely essential’ (the argument is that no other party can pull the reference data together as ESMA can).4 In order to assist ESMA, one market participant provided input for FIRDS to ESMA already before the ESMA consultation.5 The same market participant also provided input on FITRS (ESMA database for trading data). Quality issues are identified with the systems of FIRDS and FITRS.6 The input of the market participant illustrates the importance of FIRDS and FITRS for the market, among other things, for the MiFID II equity pre-trade transparency regime.
ESMA is more reluctant to intervere in the area of FIRDS/FITRS. The reason is that ESMA has made clear that – although important for market participants – FIRDS should not be considered a golden source of reference data. ESMA states that it cannot take any responsibility for the information in FIRDS being complete, accurate, and up-to-date.7 Along similar lines, ESMA does not propose changes to FIRDS in the ESMA MiFID II Review (at least not at the time of writing).8 ESMA only proposes changes in the area of FITRS (ESMA database for trading data). ESMA signals that the lack of data granularity in FITRS results in difficulties assessing individual RM/MTF waivers or qualifying the contribution of SIs (and other investment firms operating outside RMs/MTFs) to price formation.9 To remedy the situation, ESMA proposes a slight change of the MiFID II reporting requirements to FITRS for RMs and MTFs in order to be able to collect the amount of volume traded per waiver type (instead of on an aggregated basis).10 Respondents to the ESMA consultation supported the ESMA proposal. Hence, ESMA proposes to change the reporting requirements to FITRS in order to be able to collect the trading volumes executed per waiver type.11 ESMA also emphasizes the lack of impact a new liquid market-definition would have on reporting entities delivering data to FITRS, in contrast to ESMA having to change FITRS to be adapted to a new liquid market-definition.12 Put another way, ESMA emphasizes changes to FITRS (not: also FIRDS) in the ESMA MiFID II Review.