Compliance with MIFID II OTC buy-side transparency rules
Transparency is core to MiFID II requirements. For buy-side transparency, that means demonstrating clear and compliant behavior at every phase of a trade: pre-, post- and trade execution.
Extending transparency and publishing rules
In 2007, MiFID I brought about transparency for OTC trades in European equities; MiFID II extends those rules into additional equity type instruments, as well as to fixed income, derivatives, structured finance products and emission allowances.
In addition to new assets, there are new rules around publishing and aggregating OTC data, and a new regulated entity for publishing post-trade data: the Approved Publication Arrangement (APA).
The complete set of MiFID II/MiFIR pre- and post-trade transparency rules and the relevant waivers is complex, so compliance is no small feat.
Under MiFID I, there was general agreement that the sell side would take responsibility for publication.
Under MiFID II/MiFIR, you may choose to still delegate that activity, but you cannot delegate responsibility to publish the OTC trade unless one side is a Systematic Internaliser. You will need to check your arrangements – which may be more complex for non-equity asset classes.
Transparency Tools & Services
We are well positioned to help buy side firms take on trade publication. We will provide a complete set of tools and services, including an APA to enable firms to comply with these post-trade transparency requirements. This service will deliver post-trade publication for all transparency eligible products, except the equity products already covered by MiFID I.
The APA will be specifically designed to ease the complexities of publication by incorporating deferral rules into the platform to ensure that only the appropriate trades are included.
However, many of the trading platforms that the buy-side use will move to become official MiFID II trading venues, and thankfully they will take on the responsibility of all the relevant transparency. This will include our FXall platform, which will join Thomson Reuters Matching as an MTF and publish all the required post-trade data, with the appropriate delay for FX Derivatives.