Understanding the new changes of revamped MiFIR Reporting – RTS 22

Introduction

The MiFIR Review introduces amendments to Article 26 of MiFIR, focusing on the reporting requirements for certain transactions involving derivatives. Specifically, new transactions now fall under the scope of MiFIR reporting as outlined in Article 8a(2) of MiFIR2.

ESMA is tasked with updating RTS 22 (Commission Delegated Regulation 2017/590) to include:

(i) new fields for reporting the transaction effective date and the reporting entity; 

(ii) proposed identifiers and modifications to existing ones that link specific transactions and identify aggregated orders; and 

(iii) adjustments to fields to ensure alignment of MiFIR transaction reporting with the EMIR and SFTR reporting frameworks.

Furthermore, ESMA aims to enhance the reporting process by putting emphasis on 

• the identification of transactions involving financial instruments based on distributed ledger technology that are covered under Article 26 of MiFIR; and 

  
  

• modifications to fields that will improve the overall quality and efficiency of reporting.

Key Changes and Enhancements

Introduction of New Fields

• Introduce new fields for:

(i) capturing the date when the transaction obligation in financial instruments becomes effective; 

(ii) identifying the “entity subject to the reporting obligation”; 

(iii) an “INTC identifier” for detailing aggregated orders and assigning responsibility to the executing investment firm for generating this identifier consistently; and 

(iv) a unique “chain identifier” that links to the sequence of report chains associated with transaction execution, requiring the executing firm to ensure consistent use of this code in transaction reports.

• For debt instruments, the effective date will be set as the settlement date. For derivatives, it will be defined as the date the contract obligation takes effect, which could be a future date (forward starting). If the contract terms do not specify an effective date, parties must report the transaction execution date (current field 28 “trading date time” of RTS 22).

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• Expand the reporting of the Trading Venue Transaction Identification code to include transactions executed in non-EEA venues to enhance the matching process for reported transaction sides. ESMA proposes that the market-facing firm acting as the seller should be recognized as the primary entity responsible for generating the code for off-venue transactions and for sharing it with the buyer.

Alignment with EMIR, SFTR, and International Standards

• Modify certain field names (e.g., “action type”, “report submitting entity”) and clarify definitions for field names (e.g., “price currency” and “notional currency 1”); split the “underlying index name” field into two: “Indicator of the underlying index” and “Name of the underlying index”.

  
  

• Harmonize the reporting of price-related information and introduce a new article to define the rules for determining the reporting direction under MiFIR and EMIR for various instrument types.

  
  

• Align the MiFIR definition of complex trades with that of EMIR.

  
  

• Add a new field for “package transaction price” to ensure MiFIR reporting aligns with EMIR REFIT requirements and CDE Technical Guidance.

Further Enhancements

• Introduce two new fields for reporting the ISO 24165 Digital Token Identifier for DLT financial instruments and their underlying assets.

  
  

• Expand the order transmission conditions outlined in Article 4 of RTS 22 to include the case where the investment firm acts on its own behalf.

  
  

• Clarify that when a portfolio or fund manager makes an investment decision for a client, field 12 “Decision Maker” specifically notes such cases.

  
  

• Add a new field to Table 2 of Annex I for reporting client categorization as per Article 24 of MiFID II and eligible counterparties under Article 30 of MiFID II.

  
  

• Remove field 63 “Short Selling indicator”.

  
  

• Revise Tables 2 of Annex I and II to: 

(i) clarify that field 35 “Net Amount” is required for all instrument types, with “not applicable” as a fallback when information is unavailable; 

(ii) specify identification codes for fields 7 “Seller Identification Code” and 16 “buyer identification code” when LEI or natural person ID retrieval isn’t possible; 

(iii) ensure field 47 “Underlying ISIN” specifies reporting at each index ISIN level; and 

(iv) simplify field 62 to collect only information on the reference price waiver.

List of Exempted Transactions

• Update the list of exempted transactions in Article 2(5) of RTS 22 to: 

(i) include disposals of financial instruments mandated by court orders or insolvency administrators in liquidation/bankruptcy procedures; 

(ii) narrow the scope of novations listed in Article 2(5)(e).

Format for Reporting

• Change the mandated reporting format in Article 1 of RTS 22 from XML to JSON.

Implications for Market Participants

The updated MiFIR Reporting will impact all market participants subject to its rules. Key considerations include:

• Compliance Costs: While increased transparency and risk mitigation enhance market stability, they may lead to higher compliance costs, particularly for smaller entities.

  
  

• Operational Adjustments: Firms will need to revise their internal systems and processes to comply with the new reporting standards and clearing obligations, potentially requiring investments in new or upgraded technologies.

Preparing for Revised MiFIR Reporting

To effectively transition to the revamped RTS 22 MiFIR Reporting, market participants should undertake the following steps:

• Stay Informed: Stay informed about the latest developments and interpretive guidance.

  
  

• Conduct Impact Assessments: Analyze how these changes will affect your business, from compliance obligations to operational workflows. Identify gaps and devise a plan to address them.

  
  

• Invest in Technology: Utilize advanced technology solutions to automate reporting processes, enhance data accuracy, and improve risk management capabilities. This will facilitate compliance and promote operational efficiency.

Timeline

ESMA will review feedback received during this consultation in Q4 2024, with plans to publish a final report and submit the revised draft technical standards to the European Commission for endorsement in Q1 2025.

The revised RTS 22 will come into force 12-18 months post its adoption by the European Parliament; hence, towards the end of H1 2026.

Conclusion

As the implementation of the revised MiFIR Reporting advances, it is crucial for market participants to remain informed and prepared for this evolving regulatory landscape. Embracing these changes, investing in necessary resources, and positioning your organization for success will be key in the adapting derivatives market.