ESMA70-145-1345 — Guidelines on transaction reporting, order record keepi...

Guidelines on transaction reporting, order record keeping and clock synchronisation under MiFID II

Authority

ESMA

Reference

ESMA70-145-1345

Legal basis

Article 26 MiFIR; Articles 25 and 50 MiFID II

Status

In force

Published

2 October 2017

Source

ESMA landing page

Documents

Guideline PDF

Guidelines

Transaction reporting, order record keeping and clock synchronisation under MiFID II

10 October 2016 | ESMA/2016/1452

Corrected on 07/08/2017

Contents................................................................................................................................

Full table: see document.

5.8

Block 1: Buyer/Seller identification .........................................................................34

5.8.1

Buyer/Seller that is

eligible for a LEI................................................................34

5.8.2

Buyer/Seller is a natural person

......................................................................35

5.9

Block 2: Decision maker for Buyer/Seller................................................................38

5.9.1 Decision

maker is the

Buyer/Seller..................................................................39

5.9.2 Decision

maker is a third party with power of representation for the Buyer/Seller 40

5.10

Block 3 (combination of 1 and 2): Buyer/Seller and decision maker specific scenarios 41

5.10.1 Buyer/Seller

is a joint account

.........................................................................42

5.10.2 Seller is deceased...........................................................................................43

5.11 Block 4: Investment decision within the firm Field...................................................43

5.11.1 Investment decision

within the firm Field

.........................................................43

5.11.2 Investment decision made decision and the Investment Firm basis)

outside the Firm is acting on an matched or other

(the client makes the investment principal 'any capacity'

5.12

44 Block 5: Execution within the firm field....................................................................45

5.12.1 Person has the primary responsibility for

execution.........................................45

5.12.2

Algorithm has the primary responsibility for execution.....................................46

5.13

Block 6: Trading date time......................................................................................46

5.14 Block 7: Venue.......................................................................................................46 5.14.1

Executing a transaction on a Trading Venue an order

in anonymous book .....47

5.14.2 Executing a transaction on a trading platform anonymous

outside the Union in a non- order book..................................................................................................48

5.14.3 Executing a transaction on a Trading Venue by hitting its anonymous order book..................................................................................................49

own order on an

5.14.4 A Systematic internaliser executing a transaction............................................50

Block 8: Short selling flag .......................................................................................51

5.15.1 Client

of Investment Firm X is selling short Firm

(information known to X).......52

5.15.2

Investment Firm X is selling short on its own behalf ........................................52 Block 9: Waiver, OTC post-trade and commodity derivative indicators...................54

5.16.1

Waiver indicator and OTC post-trade indicator................................................54

5.16.2

Post trade indicator where an Investment Firm is matching two client orders over

the counter ....................................................................................................................57

5.16.3

Commodity derivative indicator .......................................................................58

10: Branches ................................................................................................59

5.17 Block

Table

5.17.1

Transaction executed on behalf of a client ......................................................59

Column 3

Full table: see document.

Table

5.26.3 Regulation

Chains where the conditions set out in Article 4 of Commission Delegated (EU) 2017/590 are met by all Investment Firms.........................................123

Full table: see document.

5.35.6 Credit Default Swap ......................................................................................196

5.35.7 Swaps...........................................................................................................198

The price reported in Field 33 should be consistent with the value for the fixed rate in instrument reference data............................................................................................214

the

5.35.8 Commodities based derivatives.....................................................................214

5.35.9 Complex trades.............................................................................................219

Guidelines on order record keeping.............................................................................222

General principles ............................................................................................222

6.1 Scope of order record keeping requirements........................................................222

6.2 Members or Participants of a Trading Venue........................................................222

6.3 Client identification code (Field 3).........................................................................223

6.3.1 Population of Field 3 (Client identification code) in case of aggregated orders 223

6.3.2 Population of Field 3 (Client identification code) in case of pending allocations 223

6.4 Non-executing broker (Field 6) .............................................................................223

6.5 Order status (Field 33) .........................................................................................224

Validity period date and time (Field 12) ................................................................224

6.8 Trading venue transaction identification code (TVTIC) (Field 48)

.........................225

6.9 Sequence Number (Field 15) ...............................................................................225

6.10 Validity period (Field 10).......................................................................................228

6.10.1 Good-For-Day (DAVY) flag............................................................................228

6.10.2 Combination of two validity period flags: Good-After-Date (GADV) and Good-Till- Date (GTDV) ...............................................................................................................228

Liquidity provision activity (Field 8) .......................................................................229

Legend.................................................................................................................231

6.13 Central Limit Order Book......................................................................................231

6.13.1 New/Cancellation/Modification of Orders (Field 21).......................................232

6.13.2 Additional Limit Price (Field 25).....................................................................235

6.13.3 Classification of an Iceberg Limit Order.........................................................236

6.13.4 Peg (or Pegged) Orders................................................................................238

6.13.5 Classification of a Stop Order........................................................................242

6.13.6 Routed Orders...............................................................................................244

6.13.7

Classification of Strategy Orders (Field 46) ...................................................251

6.13.8

Priority Changing...........................................................................................264

6.13.9 Trading Phases.............................................................................................267

6.14 Request for Quote Systems .................................................................................277

6.14.1 How

to register a quote request which is sent out to specific counterparties .278

6.14.2 How to which is executable

register a quote response with a limited validity time ('on the wire time') for a specific quote requester.......................................................279

6.14.3 How

to register a quote response with a different quantity to that requested. 280

6.14.4 How

to register an execution in a RFQ system..............................................281

Guidelines on clock synchronisation............................................................................282

7.1

Reportable Events................................................................................................283

7.2

Time stamp Granularity ........................................................................................283

7.3

Compliance with the maximum divergence requirements.....................................286

7.3.1 Leap Seconds...............................................................................................287

7.3.2 Local Time

and Offset from UTC...................................................................287

7.3.3

Applicability for Investment Firms that are not direct members or particpants of Venue.......................................................................................................287

7.4

the Trading

Application, host and wire timestamps..................................................................287

7.5

Gateway-to-gateway latency ................................................................................288

Annexes......................................................................................................................288

Annex I Processing of reports received from submitting entities .....................................288

Executive Summary

Reasons for publication

After the finalisation of the draft regulatory technical standards on transaction reporting, order record keeping and clock synchronisation (Commission Delegated Regulation (EU) 2017/590, Commission Delegated Regulation (EU) 2017/580 and Commission Delegated Regulation (EU) 2017/574 1 ), ESMA has launched its own initiative work on the supervisory convergence measures on the implementation of these RTSs.

These Guidelines reflect the outcome of this work and follow the Consultation Paper (CP) that was published in December 2015 2 .

Sections, 2 and 3 define the scope, definitions and purpose of the Guidelines. Section 4 defines the procedure for compliance with the Guidelines. Sections 5 and 6 specify individual scenarios applicable to a given transaction and order record keeping activity. Each of the scenarios is accompanied with the precise technical programing instruction to be used to represent the specific reportable values. In addition to the reporting and record keeping scenarios, these sections also provide a number of other clarifications on the application of the requirements under the Commission Delegated Regulation (EU) 2017/590 and Commission Delegated Regulation (EU) 2017/580 which were requested by the market participants during the consultations on these RTSs but could not be addressed in the final technical standards due to the level of detail and specificity of such requests. Section 7 provides clarifications on the application of the clock synchronisation requirements (Commission Delegated Regulation (EU) 2017/574).

2 Consultation Paper on Guidelines on transaction reporting, reference data, order record keeping & clock synchronisation (ESMA/2015/1909) is available on ESMA website at the following link:

https://www.esma.europa.eu/sites/default/files/library/2015-

1909_guidelines_on_transaction_reporting_reference_data_order_record_keeping_and_clock_synchronisation.p df

1 Scope

Who?

These guidelines apply to Investment Firms, Trading Venues, approved reporting mechanisms (ARMs) and competent authorities (CAs).

What?

These guidelines apply in relation to the submission of transaction reports pursuant to Article 26 of Regulation (EU) No 600/2014 of the European Parliament and of the Council (MiFIR); record keeping of orders pursuant to Article 25 of MiFIR and synchronisation of business clocks pursuant to Article 50 of Directive 2014/65/EU of the European Parliament and of the Council (MiFID II).

When?

These guidelines apply from 3 January 2018.

2 Definitions

Terms used in MiFID II and MiFIR of the European Parliament and of the Council have the same meaning in these guidelines. In addition, references to a 'Firm' in these guidelines refer to any firm that is not an 'Investment Firm' within the meaning of MiFID II unless otherwise specified.

References to specific 'Field' in the guidelines on transaction reporting refer to the fields in Table 2 of Annex I of Commission Delegated Regulation (EU) 2017/590 and in the guidelines on order record keeping to the fields in Table 2 of the Annex of Commission Delegated Regulation (EU) 2017/580.

3 Purpose

The purpose of the guidelines is to provide guidance to Investment Firms, Trading Venues, ARMs and Systematic Internalisers (SIs) 10 on compliance with the reporting and order record keeping provisions of MiFIR and Commission Delegated Regulation (EU) 2017/590, Commission Delegated

http://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=uriserv:OJ.L_.2017.087.01.0449.01.ENG&toc=OJ:L:2017:087:TOC

http://eur-lex.europa.eu/legal- Regulation (EU) 2017/580 and Commission Delegated Regulation (EU) 2017/574. They are designed to ensure consistency in the application of these requirements. In particular, the guidance is focused on the construction of transaction reports and of the order data records field by field for various scenarios that can occur. Given the wide range of potential scenarios, these guidelines do not provide an exhaustive list of all scenarios. However, persons subject to these guidelines should apply the elements of the most relevant scenario to construct their records and reports. All the concepts specified in the guidance document apply solely to Article 25 of MiFIR on order data record keeping obligations, Article 26 of MiFIR on transaction reporting obligations and Article 50 on synchronisation of business clocks of MiFID II.

content/EN/TXT/?uri=uriserv:OJ.L_.2017.087.01.0193.01.ENG&toc=OJ:L:2017:087:TOC

10 As defined in Article 4(1)(20) of MiFID II.

All names and surnames used in these guidelines are fictitious.

4 Compliance and reporting obligations

Status of the guidelines

This document contains guidelines issued under Article 16 of the ESMA Regulation. In accordance with Article 16(3) of the ESMA Regulation CAs and financial market participants must make every effort to comply with guidelines and recommendations.

CAs to whom the guidelines apply should comply by incorporating them into their supervisory practices, including where particular guidelines within the document are directed primarily at financial market participants.

Reporting requirements

CAs to which these guidelines apply must notify ESMA whether they comply or intend to comply with the guidelines, with reasons for non-compliance, within two months of the date of publication by ESMA to MiFIRreportingGL@esma.europa.eu. In the absence of a response by this deadline, CAs will be considered as non-compliant. A template for notifications is available from the ESMA website.

Financial market participants are not required to report whether they comply with these guidelines.

5 Guidelines on transaction reporting

This section on transaction reporting is split into four parts:

Part I - General principles. Describes the general principles to apply to transaction reporting. It covers how to construct a transaction report, and in what circumstances and where to send the report. It provides high level approaches to reporting and further guidance on certain exclusions from the meaning of transaction as specified in Article 2(5) of Commission Delegated Regulation (EU) 2017/590.
Part II - Blocks. Covers blocks (collection of fields), where each block addresses the relevant fields for a particular topic, with accompanying examples of how to populate these. The blocks are structured to be independent of each other.
Part III - Scenarios. Provides examples based on different trading scenarios that a reporting party might experience. In particular, transactions resulting from transmissions of orders, grouped orders and the provision of Direct Electronic Access (DEA) are presented.

· Part IV - Instruments. Focuses on reporting guidance for various financial instruments 12 . Most examples are focused on derivatives given that these financial instruments have a more complex reporting pattern.

For each example in this document there is a corresponding table of relevant fields and the expected XML-text rendering of those data. The corresponding table and xml should be interpreted as follows unless otherwise stated:

a) "N" and "Field", correspond respectively to the number and the name of fields in Commission Delegated Regulation (EU) 2017/590, Annex I, Table 2.
b) The "Values" column contains the expected literal value of the example. Literal values are enclosed in single quotes. In some cases, a descriptive value is shown instead, e.g. "{LEI} of Firm X". These values should be replaced by an actual value corresponding to the description. Where referred, the values of the fictive entities in the Legend will be applied to the XML. Terms in brackets refer to the data types described in Annex I, Table 1 of the Commission Delegated Regulation (EU) 2017/590.
c) Blanks in the "Values" column explicitly state that these fields are not applicable to and should not be populated for the specific scenario illustrated.

XML-text excerpts are provided to illustrate how the data should be rendered in the file submitted to the CA. However, for the purpose of implementation of the ISO 20022 methodology the full technical specification of the messages should be consulted and only the full technical specification available on https://www.esma.europa.eu/sites/default/files/library/2016-

1521_mifir_transaction_reporting_technical_reporting_instructions.pdf should be considered as the correct specification of messages.

All instruments referred to in the examples are reportable financial instruments under Article 26(2) of MiFIR.

Reporting is only shown for the parties examined in the relevant example and should not be taken to mean that other parties in such example do not have transaction reporting responsibilities.

All times are in UTC unless otherwise stated. Date and time are shown with the minimum granularity required by Commission Delegated Regulation (EU) 2017/590 (Annex I, Table 2, Field 28) and may be reported to a higher granularity as explained in section 7.2 on time stamp granularity.

All trading is assumed to be electronic trading but not HFT for the purpose of the granularity of the time to be reported.

Where not explicitly stated, the Investment Firm(s) whose reports are shown are acting in an 'any other capacity'.

Legend:

Firm X (LEI: 12345678901234567890) is an Investment Firm.

Firm Y (LEI: ABCDEFGHIJKLMNOPQRST) is an Investment Firm.

Firm Z (LEI: 88888888888888888888) is an Investment Firm.

Client A (LEI: AAAAAAAAAAAAAAAAAAAA) is a legal entity.

Client B (LEI: BBBBBBBBBBBBBBBBBBBB) is a legal entity.

Client C (LEI: CCCCCCCCCCCCCCCCCCCC) is a legal entity.

Trading Venue M (segment MIC: 'XMIC'). This Trading Venue operates an anonymous order book with a central counterparty that has a LEI of 11111111111111111111.

Client 1: natural person, Jean Cocteau, French national, with a date of birth of 4 June 1962 (concatenated code: FR19620604JEAN#COCTE).

Client 2: natural person, Jose Luis Rodriguez de la Torre, Spanish national, with a date of birth of 27 February 1976. The Spanish tax identification number for Jose Luis Rodriguez de la Torre is 99156722T.

Representative 1: natural person, Fabio Luca, Italian national with fiscal code ABCDEF1234567890 and date of birth of 11 October 1974.

Trader 1: Peter Morgan, a Canadian national (passport number 1112223334445555) acting for Firm X.

Trader 2: Peter Jones, UK national, with UK National Insurance number AB123456C, acting for Firm X.

Trader 3: John Cross, Belgian national, with numéro de registre national of 12345678901, acting for Firm X.

Trader: Marie Claire, French national, date of birth 2 December 1963 (concatenated code FR19631202MARIECLAIR), acting for Firm Y.

Trader 5: Juliet Stevens, Finnish national with Personal Identity code 311280-888Y, is acting for Firm Z.

Trader 6: Adam Jones, Hungarian national, date of birth 13 April 1980 (concatenated code HU19800413ADAM#JONES), acting for Firm Z.

In order to save space and focus on the main points being illustrated by the examples, it is important to emphasise that any example with its corresponding table and xml will address only a subset of the fields actually required under Commission Delegated Regulation (EU) 2017/590. Fields that are not specifically mentioned in an example cannot be assumed to be irrelevant. All the fields that are relevant to an actual transaction need to be reported.

To ensure correct transaction reporting, this document should be read in conjunction with the relevant provisions of MiFID II, MiFIR as well as Commission Delegated Regulation (EU) 2017/590, Commission Delegated Regulation (EU) 2017/580 and Commission Delegated Regulation (EU) 2017/574. ESMA and CAs may also publish technical specifications.

Part I - General principles

5.1 General approach to reporting

The purpose of transaction reporting is to provide CAs with information about transactions. It aims at providing a representation of the transaction that informs the competent authority about all relevant circumstances under which the transaction took place. Depending on the trading capacity of the Investment Firm and whether or not the Investment Firm is dealing for a client, a transaction may have to be reported in more than one report.

In order to fufil their duties as indicated in Recital 32 of Commission Delegated Regulation (EU) 2017/590, CAs require an accurate and holistic view of transactions that are within the scope of reporting requirements under Article 26 of MiFIR. As clarified in Recital 11 and further specified in Article 15(5) of Commission Delegated Regulation (EU) 2017/590, an Investment Firm should therefore ensure that a collective view of the transaction reports reported by the Investment Firm as the executing entity accurately reflects all changes in its position and in the position of its clients that arise from reportable transactions 13 in the financial instruments concerned as at the time the transactions were executed. For example, if an Investment Firm acquires some financial instruments on own account and then sells the same amount of instruments to its client the reports by the Investment Firm should indicate that the net change for the Investment Firm is flat and the client has acquired the instruments. This principle applies regardless of whether any or all of the reports are submitted by the Investment Firm itself, an ARM or a Trading Venue. For example, an Investment Firm that relies on a Trading Venue to report the information about the market side of a transaction should not submit a transaction report for the same market side transaction. Where that transaction is for a client, in accordance with these guidelines, an Investment Firm should not submit a separate transaction report for the transaction with either matched principal capacity or 'any other capacity' as this will have the effect of an artificial increase in the number of transactions reported as being executed by that Investment Firm. Further, the individual reports by an Investment Firm for a transaction should be consistent with each other and accurately reflect the roles of the Investment Firm, its counterparties, the clients and the parties acting for the clients under a power of representation.

According to Article 26(1) of MiFIR, Investment Firms which execute transactions in financial instruments should report complete and accurate details of such transactions. This means that where two Investment Firms trade with each other, each will make its own transaction report that reflects the transaction from its own perspective. At the same time, the content for the following fields (describing the common objective elements of the transaction concluded between the two Investment Firms) should match in the respective equivalent reports of each of the two Investment Firms: venue 14 , trading date time, quantity, quantity currency, price, price currency, up-front payment, up-front payment currency, and instrument details, where relevant.

13 It should be noted that the reporting requirements are not intended to capture the Investment Firm's or the Investment Firm's client's actual position. What is of interest is the change in position resulting from reportable transactions.

14 For market side transactions executed on a Trading Venue (i.e. as opposed to the associated allocation to the client).

An Investment Firm's transaction reports should include not only the information about the market side of the transaction but also information about any associated allocation to the client, where relevant. For example, where an Investment Firm X acting on behalf of a client purchases financial instruments from another Firm or Investment Firm Y, then X should report that it has traded with Y for X's client. If X is buying the financial instruments on an own account basis and sells the said financial instruments to a client, then the purchase from Investment Firm Y and the sale to the client should be reported in two separate own account transaction reports. Similarly, where an Investment Firm executes a transaction with another Firm or Investment Firm by aggregating several clients it should report the aggregate (block) trade with the Firm or Investment Firm (market side) as well as the individual allocations to its clients (client side).

For example, where an Investment Firm is trading on a Trading Venue for a client on an own account basis it should submit two transactions reports: one for the transaction with the Trading Venue (market side) and the other for the transaction with the client (client side). Where an Investment Firm is acting on a matched principal or 'any other capacity' basis for a single client then it should submit a single transaction report encompassing both the market side and the client side and should include all the fields applicable to the client. The following diagram illustrates these concepts:

5.2 Trading capacity

As set out in the Commission Delegated Regulation (EU) 2017/590 (Field 29), there are three different trading capacities that may be reported: dealing on own account, matched principal and 'any other capacity'. The reported trading capacity should reflect the capacity in which the Investment Firm actually traded and should be consistent with the rest of the information in the Investment Firm's transaction report(s).

5.2.1 Dealing on own account (DEAL)

Where an Investment Firm is dealing on own account it should be reported as either the buyer or seller in the transaction report. The corresponding seller or buyer will be the counterparty or client or Trading Venue 17 that the Investment Firm is dealing with. The Investment Firm may be acting purely to action its own proprietary trades or may be acting on own account with a view to filling orders that it has received from a client. In the latter case, the trading time and date for the client side report may be the same as for the market side report or could be later and the price of the market side and client side report could be the same or could differ.

17 As set out in Block 7.

5.2.1.1 Dealing for itself

Example 1

Investment Firm X dealing on own account on a proprietary basis purchases financial instruments on Trading Venue M.

Investment Firm X's report should be:

Field

Values

XML representation

Executing entity identification code

{LEI} of Investment Firm X

... 12345678901234567890 ... 12345678901234567890 11111111111111111111 ... DEAL ...

Buyer identification code

{LEI} of Investment Firm X

... 12345678901234567890 ... 12345678901234567890 11111111111111111111 ... DEAL ...

Seller identification code

{LEI} of CCP for Trading Venue M

... 12345678901234567890 ... 12345678901234567890 11111111111111111111 ... DEAL ...

Trading capacity

'DEAL'

... 12345678901234567890 ... 12345678901234567890 11111111111111111111 ... DEAL ...

5.2.1.2 Dealing for a client

Example 2

Investment Firm X receives an order from a client, Client A, to purchase a financial instrument. Investment Firm X deals on own account by purchasing the instrument on Trading Venue M and selling those instruments to Client A.

As noted above, the price of the different reports of Investment Firm X can be different, e.g. Investment Firm X may buy from a venue/counterparty at GBP 0.352 and sell to Client A at GBP 0.370, in which case Investment Firm X should report as:

Field Values Report # 2

Executing entity identification code

{LEI} of Investment Firm X

Buyer identification code

{LEI} of Investment Firm X

{LEI} of Client A

Seller identification code

{LEI} of CCP for Trading Venue M

{LEI} of Investment Firm X

Trading capacity

'DEAL'

Price

'0.352'

'0.370'

Venue

Segment {MIC} of Trading Venue M

'XOFF' 18

XML representation:

Example 3

Investment Firm X receives an order from a client, Client A, to purchase financial instruments and fills the order from its own books.

Field

Values

XML representation

Executing entity identification code

{LEI} of Investment Firm X

... 12345678901234567890 ... AAAAAAAAAAAAAAAAAAAA 12345678901234567890 ... DEAL ... XOFF ... ...

Buyer identification code

{LEI} of Client A

... 12345678901234567890 ... AAAAAAAAAAAAAAAAAAAA 12345678901234567890 ... DEAL ... XOFF ... ...

Seller identification code

{LEI} of Investment Firm X

... 12345678901234567890 ... AAAAAAAAAAAAAAAAAAAA 12345678901234567890 ... DEAL ... XOFF ... ...

Trading capacity

'DEAL'

... 12345678901234567890 ... AAAAAAAAAAAAAAAAAAAA 12345678901234567890 ... DEAL ... XOFF ... ...

Venue

'XOFF'

... 12345678901234567890 ... AAAAAAAAAAAAAAAAAAAA 12345678901234567890 ... DEAL ... XOFF ... ...

5.2.2 Trading in a matched principal trading capacity (MTCH)

Article 4(1)(38) of MiFID II defines matched principal trading as a 'transaction where the facilitator interposes itself between the buyer and the seller to the transaction in such a way that it is never exposed to market risk throughout the execution of the transaction (...)'. Consequently, the transaction report should show that the executing Investment Firm does not have a change of position as a result of the transaction.

Where there is only one client a single transaction report should be submitted including both the market side and client side information. The client(s) should be populated in the buyer/seller field while the venue or counterparty should be populated in the seller/buyer field. When more than one client is involved, the aggregate client account (section 5.23 on grouping orders) can be used to link the market side with the allocations to each client as shown in Example 61 and the client side reports should include all applicable fields.

Example 4

If the transaction in the first example of 5.2.1 took place on Trading Venue M at 09:30:42.124356 on 9 June 2018 at a price of GBP 0.352 and Investment Firm X was acting in a matched principal capacity, Firm X's reports should be:

Field

Values

XML representation

Executing entity identification code

{LEI} of Investment Firm X