Using OTC Post-Trade Indicators in MiFid Reporting

This article discusses the reasons that a transaction might be eligible for deferred post-trade MiFID reporting and common problems associated with it.

An important part of the MiFIR regulations concerns the prompt publication of post trade OTC Trade data to enable improved market transparency.

And to make the job of finding out if OTC post trade data is being correctly published, the NCAs can use information held within transaction report to identify possible errors.

With this in mind, it would be good for firms to check that they have been reporting OTC trades and transactions correctly.

Who?

For Investment Firms both in the same reporting regime (FCA or ESMA), in general for an off-venue OTC trade, the seller is responsible for trade reporting. The exception to this is if one of the counterparties is an SI, then the SI has reporting responsibilities.

The other reporting situation for dealing off-venue is when one of the counterparties is in a different reporting regime (or none). In this case the MiFID investment firm is responsible for trade reporting to their home regime.

When?

Post Trade APA publication should happen in real time, but for some trades this publication can be deferred. The reasons for deferment are listed below. More than one flag maybe applicable.

• BENC – Benchmark transaction
• ACTX – Agency cross transactions
• ILQD – Illiquid instrument transaction
• SIZE – Above specific size transaction
• ILQD – Illiquid instrument transaction
• SIZE – Above specific size transaction
• CANC – Cancellation (Not used by Investment Firms)
• AMND – Cancellation (Not used by Investment Firms)
• SDIV – Special dividend transactions
• RPRI – Transactions that have received a price improvement
• TPAC – Package transaction
• XFPH – Exchange for physical transaction

There a few points to bear in mind when looking at the OTC Post Trade indicator. At Qomply, common problems we have seen are:

• Investment firms should not populate the OTC Post trade indicator field with 'CANC' as cancellations are not deemed to be transactions for the purposes of MF1R Article 26
• Some of the circumstances outlined in the ESMA table cannot occur at the same time. However, on occasion more than one of the flags may apply. If this is the case, multiple flags can be specified.
• For transactions with a ACTX OTC post trade indicator, the trading capacity should be AOTC as the activity is taking place on an agency basis.

A large number of Investment Firms outsource the calculation of the OTC post trade indicator flag to their ARM. This is perfectly acceptable to the NCAs but it is worth remembering that outsourcing does not remove responsibility for correct reporting away from the Investment Firm. This is a further reason to get your MDP files from your NCA and set up a reconciliation programme.