MiFID II Webinar Q&A With AIMA, Katten and Broadpeak

AIMA, BroadPeak and Katten Muchin Rosenman had a great webinar and Question and Answer session last week on MiFID II transaction reporting and position limits.  We had just over 350 attendees and could not quite get to all the questions.  So, we have put our heads together and are publishing the first set of questions here.   (Position Limit Questions to Follow!)

If you have questions about MiFID II please feel free to reach out to any of the presenters below.

Nathaniel Lalone:

Gordon Allott:

Neil Robson:

Tom Eisner:


If we do not have MiFID II reporting obligations, do we have to monitor MiFID Position Limits?

YES.  The long arm of MiFID II requires firms to monitor their European trades no matter where they are located.  Much like exchange limits, CME and ICE don’t care where you are, if you trade there you are required to monitor limits.

 If we report under EMIR, must I also report it under MiFID II?

Very likely.  It’s important to remember EMIR and MiFID II are two entirely different regulatory regimes. While EMIR is focused on systemic risk, MiFID II is focused on market abuse.  On the surface, given the similarities in data fields, this will seem like duplicate reporting but in fact there are notable differences in the data.  Thus, if a firm is reporting under EMIR, it is highly likely that additional reporting (to an ARM) will have to be made for MiFID II purposes as well.  Having said all of that, if your firm is a commodity firm and falls under the “ancillary test” threshold you will not need to report.

 Would a bespoke OTC FX Option be eligible for reporting?

Yes.  If the entity is in scope of MiFID II/ MiFIR, this is a reportable transaction.  For example, the transaction above may be both reportable under EMIR as well as MiFID II.

For AIFMs , that manage managed accounts and report under EMIR, what is the additional requirement?

AIFMs that manage managed accounts may or may not have to perform additional reporting to meet the MiFID II requirements, depending on which jurisdiction they are in, and how the local regulator has implemented the MiFID II/ MiFIR transaction reporting rules.  In the UK, a firm that is an authorised AIFM and which has FSMA Part 4A permission to manage investments (a MiFID-equivalent activity – making the firm a “collective portfolio management investment firm”) does not have to undertake MiFID II/ MiFIR transaction reporting – so the EMIR report would be needed but not a transaction report to a UK ARM.

Please can you reconfirm the obligation for transaction reporting. The slide seemed to be saying that on venue transactions don’t need to be reported by MiFID investment firms?

This is an important transaction reporting nuance of MiFID II.  If you are trading “On Venue” (via MTF/OTF) MiFID II only obligates the venue to report on your behalf if you are NOT subject to MiFIR.  If you are subject to MiFIR, then the obligation remains with your firm.

With the obligation, the following question is, “Can the MiFID responsibility be delegated?”  In this case the venue may (but not necessarily) report on your behalf.  However, the obligation will always remain with your firm.  This means that no matter who is doing the reporting, it is always necessary that your firm ensures proper reporting.

When managing multiple managed account in parallel, the question is whether we should report the transactions that we made on behalf of all of our clients (either directly or via the executing / clearing broker) or if it’s up to each individual clients to comply with the requirements and report the transactions that need to be reported.

If the investment decision remains with your firm on these managed accounts, then the reporting responsibility is with your firm.

How would a firm identify if it is reportable as an EE OTC?  For a derivative instrument traded OTC, such as an interest rate swap, is reportable? Assume no ISIN for the instrument or underlying. Would the IRS be a non-reportable instrument? How would a firm identify if it is reportable as an EE OTC?

The first question is whether there is an underlying on a trading venue somewhere in the EU.  For some products this will be fairly easy to identify. (For example, an OTC equity derivative on a French company traded on Euronext.)  For other products, such as IRS, there is a high probability that there is an on venue product that is the economic equivalent even though the trader may not have been thinking about it at the time of execution.  To the extent that compliance feels there are substantive differences between the OTC product and the closest underlying (and hence the choice to not report the transaction), it is good practice to internally document the reasoning behind the distinction (in case the regulator ever asks why it was not reported).

Identification of reportable transactions is probably one of the most important immediate exercises.  Consideration should be given to the entire portfolio, looking at all transaction types executed as well as potential embedded equivalent positions in ‘exotic’ transactions.

Do you have a view on personal information, are some firms using a reference code rather than supplying the personal information (passport numbers) themselves?

Please speak with your legal counsel about the appropriate personally identifying information for your country – the requirements vary across the EU.  This is primarily governed by Regulatory Technical Standard 22 (RTS 22) and caution should be exercised about submission of non-conforming personally identifying information.