Bats Unveils MiFID II Trade Reporting
Bats Europe is expanding its trade reporting facility to provide an assisted reporting model so buyside firms can meet MiFID II requirements using their broker’s existing connectivity to the European exchange.
Under MiFID II, the new regulations covering European financial markets from 2018, investment firms cannot delegate formal regulatory responsibility for trade reporting to their sellside counterparties, as they can under MiFID.
Dave Howson, chief operating officer at Bats Europe, told Markets Media: “The buyside cannot delegate responsibility for reporting but our assisted reporting model allows them to use the technology infrastructure of their brokers to report out to the market. Buyside firms will receive a detailed file of trades that have been reported by their broker for reconciliation.”
Brokers have been using Bats Europe’s trade reporting facility, BXTR, since it was launched in 2013 for equities and exchange-traded products. BXTR’s share of OTC trade reporting in the region has grown to approximately 60% according to Bats Europe. Under MiFID II, brokers will continue to trade report in the same way but will add the identity of the buyside firm if they are providing assisted reporting. Fund managers will be able to trade report through buying a license, rather than making any technical or operational change to connect to an Approved Publication Arrangement.
“This is a small step for BXTR but provides massive value for the buyside as they can trade report with low friction and low cost,” added Howson.
Under MiFID II, the selling firm is responsible for the trade report unless it is dealing with a systematic internaliser, an investment firm that deals on its own account on an organised, frequent, systematic and substantial basis. Bats Europe said that, therefore, the buyside is likely have an OTC trade reporting obligation when trading with a counterparty from outside Europe; when selling to another investment firm that is not a systematic internaliser in a specific instrument and when trading between different funds that it manages and cannot take advantage of the relevant exemptions.
Howson continued that buyside firms are analysing how often they are likely to have to trade report as they can also enter trade details directly into BXTR using a GUI [graphical user interface].
“If firms will only be reporting trades once a month or once a year, they may wish to utilize the GUI,” added Howson. “We expect that frequent trade reporting will be automated by most firms.”
BXTR reporting currently covers nearly 13,000 European equities and ETPs but MiFID II extends reporting from equities to a wider range of asset classes, such as commodities, as well as increasing the number of fields that have to be reported.
Howson said: “At this stage we will continue to provide reporting for equities and ETPs. Non-equity reporting under MIFID II will be massive, but given the lack of clarity, a one-stop shop for reporting all asset classes is not feasible by 2018.”
Bats Europe is adding to the reporting platforms that have been launched to meet MiFID II. For example, fixed income is included in MiFID II reporting and MTS, the London Stock Exchange’s electronic bond trading venue, said last month it is launching a dedicated web portal and trade reporting service.
Oliver Clark, head of product at MTS, said in a statement: “We are working to achieve technical compliance well ahead of the introduction of MiFID II in January 2018 as part of the London Stock Exchange Group’s integrated offering covering both on-venue trading and over-the-counter trade and transaction reporting.”
Thomson Reuters also said last month it is creating a suite of reporting services to meet MiFID II post-trade transparency requirements.
“In preparation for the new regulations, the company is working closely with over 50 European exchanges and more than 30 additional venues to onboard new MiFID II content to its Elektron Data Platform,” added Thomson Reuters. “It is also providing test data to market participants so that they can prepare their systems for new parameters, such as high-precision time-stamps, in advance of MiFID II deadlines.”
Collin Coleman, chief executive of reporting platform Abide Financial, said a media briefing last month that consolidation is likely amongst the reporting platforms which have launched to meet the MiFID II regulations. He expected there to be consolidation in the reporting space from around 10 providers to two. Coleman said Abide has more than 120 clients including banks, asset managers, hedge funds, brokers, trading firms and venues and he expects that to double due to MiFID II.
Global spending on financial information exceeded $27bn (€25.3bn) for the first time last year according to a recent report from Burton-Taylor International Consulting, part of the TP Icap Group. Spending on market data, analysis and news increased by 3.45% from 2015 to reach $27.48bn last year.
Douglas Taylor, founder and managing director of Burton-Taylor, said in a statement: “Although EMEA held the market back last year, MiFID II requirements and the tight regulatory environment should drive spend in all regions in 2017.”
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