MiFIR requires firms that execute transactions in equities, ETFs, and derivatives to report transaction details to an ARM (third party firms that act as depositories for accepting Transaction Reports) or NCA (country regulators, ie. BaFin in Germany or the FCA in the UK) on a T+1 basis.
Who is required to submit Transaction Reports?
- All investment firms that provide services to clients in financial instruments are required to report.
What is the purpose of MiFID II / MiFIR?
- The focus of MiFID II is investor protection by enhancing transparency and maintaining market integrity and efficiency. Regulators require detailed transaction information to be reported on a T+1 basis, with enhanced supervision being focused on algorithmic or high frequency trading. All relevant types of securities and market participants are in scope.
Why report to an ARM (Approved Reporting Mechanism) vs. reporting directly to an NCA (National Competent Authorities)?
- ARMs validate for submission errors and can send rejection messages (missing fields, duplicate ticket submissions, etc) back to the submitting party. This allows firms to make corrections before the Transaction Report is submitted to the NCA and to avoid being flagged for incomplete or inaccurate reporting.
- A single ARM can report to multiple NCAs in different countries, reducing overhead for the TR submitting firm.
- NCAs only support a single file format of XML for submitted reports.
- In the UK, the FCA charges submission fees.