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Circular C235 (Identifying reference data relating to financial instruments)

10/08/2018
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MNK Risk Consulting > Regulatory Developments > Circular C235 (Identifying reference data relating to financial instruments)

Through the Circular, CySEC informs the Reporting Entities [Market Operators operating a Regulated Market (“RM”) or a Multilateral Trading Facility (“MTF”) or an Organised Trading Facility (“OTF”), or Cypriot Investment Firms (“CIFs”) operating an MTF or OTF, or CIFs acting as Systematic Internalisers (“Sis”)] regarding the new requirements for identifying reference data relating to financial instruments, as provided in Article 27 of markets in financial instruments regulation (“MiFIR”) EU No 600/2014 and in Article 4 of market abuse regulation (“MAR”) EU No 596/2014; that both will enter into force on 03.01.18.

As per MiFIR and MAR, trading venues (“TVs”) and CIFs acting as SIs, must submit identifying reference data on each financial instrument admitted to trading, or traded on their systems, to their competent authorities which are required to transmit it to ESMA for subsequent publication on its website. TV means a regulated market, an MTF or an OTF.

Such obligation already existed under markets in financial instruments directive (“MiFID I”) EU 2004/39/EC, only though for financial instruments admitted on a Regulated Market (“RM”). Under MiFIR/MAR, the scope of financial instruments is expanded as illustrated in the following diagram:

Article 27(1) of MiFIR states that, for the purpose of transaction reporting:

  1. TVs must provide their competent authorities with identifying reference data relating to financial instruments admitted to trading or traded on their systems.
  2. SIs must provide their competent authorities with reference data of the following instruments that are traded on their systems:
  • Financial instruments where the underlying is financial instrument traded on a TV.
  • Financial instruments where the underlying is an index or a basket composed of financial instruments traded on a TV.

Article 4(1) of MAR states that market operators of RM and market operators operating an MTF or an OTF shall, without delay, notify the competent authority of the TV of any financial instrument for which a request for admission to trading on their TV is made, which is admitted to trading, or which is traded for the first time.

In addition to the abovementioned regulatory requirements, the following documents provide further requirements/guidance regarding reference data relating to financial instruments:

  1. Commission Delegated Regulation (EU) 2017/585 regarding regulatory technical standards for the data standards and formats for financial instrument reference data and technical measures in relation to arrangements to be made by ESMA and competent authorities.
  2. Commission Delegated Regulation (EU) 2016/909 regarding regulatory technical standards for the content of notifications to be submitted to competent authorities and the compilation, publication and maintenance of the list of notifications.
  3. Technical Reporting Instructions – MiFIR Transaction Reporting – ESMA/2016/1521
  4. Reporting Instructions – FIRDS Reference Data System (ESMA/2016/1522)
  5. Reporting Instructions- FIRDS Transparency System (ESMA/2016/1523)
  6. Questions and Answers on MiFIR Data Reporting (ESMA 70-1861941480-56)

 

ESMA has developed and is currently operating a Financial Instruments Reference Data System (“FIRDS”), which covers requirements for financial instrument reference data collection and publication as well as the collection and processing of additional data to support the MiFIR transparency regime and suspension coordination, as shown in the following diagram:

As per the regulatory requirements:

  1. Reporting Entities should provide reference data regarding financial instruments to their competent authorities.
  2. Competent authorities should provide that information to ESMA.
  3. ESMA publishes that information on its website for public access and to competent authorities as downloadable files.

FIRDS system (which went live since July 2017) requires reference data to be sent by TVs, SIs and NCAs using a standardised ISO 20022 XML format, which it processes, applies quality checks and updates the central database. A number of competent authorities have delegated to ESMA the tasks of collecting the financial instrument reference data directly from TVs and SIs on their behalf. CySEC is among the authorities that have delegated the aforementioned tasks. Therefore, the Reporting Entities that fall under CySEC’s supervision must provide ESMA directly with the reference data of all financial instruments admitted to trading or traded, through their systems, instead of doing this through CySEC.

CySEC’s expects that: the Reporting Entities [Market Operators operating a Regulated Market (“RM”) or a Multilateral Trading Facility (“MTF”) or an Organised Trading Facility (“OTF”), or Cypriot Investment Firms (“CIFs”) operating an MTF or OTF, or CIFs acting as Systematic Internalisers (“Sis”)] must ensure that:

  1. They are familiarised with the abovementioned provisions regarding identifying reference data relating to financial instruments and its submission to ESMA.
  2. All issuers of financial instruments admitted to trading or traded on their systems have a LEI.
  3. All financial instruments admitted to trading or traded on their systems have an ISIN.
  4. They have implemented system interfaces for the uploading of data to the FIRDS system and started doing this (as it is mentioned above, the FIRDS system went live in July 2017).

Note: For ease of reference and better understanding, the interpretation of terms used is included in the Annex to the Circular