What is MiFID II?
MiFID II is a European Union regulation that has the aim of making financial markets more open, efficient, resilient, and transparent. MiFID stands for Markets in Financial Instruments. As the name suggests, MiFID II, is the second installment of MiFID which was implemented in 2007. The EU Official Journal published the MiFID II directive and its corresponding regulation MiFIR on June 12th 2014. It will come into force as of January 3rd, 2018.
MiFID II is the directive from the EU commission. Accompanying MiFID is the MiFIR, Markets in Financial Instruments - Regulation. MiFIR is the European regulation enforcing the MiFID directives. To interpret this directive and regulation another EU body becomes involved. That body is ESMA (European Securities and Markets Authority). They provided those affected by MiFID II a set of guidelines, known as RTS or regulatory technical standards. These technical standards have since been adopted by the European Commission. These documents outline a vast array of standards. Some of these are time synchronization, timestamp granularity, trade reporting, transaction reporting, record keeping, and kill switches.
Is InfoReach Prepared?
As a leading provider of trading solutions InfoReach Inc. has established a MiFID II program providing necessary functionality and support to help its clients to be compliant with the relevant MiFID II Regulatory Technical Standards (RTS) and other relevant regulatory requirements for all asset classes, through the delivery of MiFID II trading solutions. Several key areas were identified for enhancements to support the requirements presented in the RTS documents.
- Time Synchronization
- Time Stamp Granularity
- Broker Certification for MiFID II
- Reporting to APA
- Reporting to ARM
- Risk Controls / Kill Switch
While living strictly behind the scenes MiFID II has elevated time synchronization standards across the board. FINRA had previously set the standard for time synchronization, with which InfoReach had been in compliance. The new time sync standard is more stringent and requires a path to one of several particular synchronization sources. To meet this need InfoReach has partnered with GTT. With this partnership InfoReach has been able to establish synchronization with the National Institute of Standards and Technology in Boulder, Colorado.
Time Stamp Granularity
Another behind the scenes development was changes to the time stamp granularity requirements as laid out in RTS 25. While InfoReach has in the past supported Millisecond time stamps MiFID II has raised the requirement for some deemed high frequency to the level of microsecond. While the already supported millisecond granularity is adequate for most, we have made microseconds available across the full InfoReach product line, including the InfoReach FIX Engine, Buy-Side OEMS - TMS, Sell-Side OEMS – TMSbd, HiFREQ Algorithmic Platforms, and InfoReach FIX Network – IFN.
Broker Certification for MiFID II
An important piece to the MiFID II changes is the increased reporting requirements, discussed in reporting to APA and reporting to ARM. In order to adhere to these reporting requirements we first need to have all the information necessary from the electronic messaging. InfoReach has been working with broker partners to certify with them these changes in a timely manner and expects that all EU partners will be updated by the end of the year. Some of the new requirements have long been supported by InfoReach such as Last Capacity, Last Market, and Last Liquidity Indicator. It also includes many of the important fields such as LEI, indications of systematic internaliser, and party ID.
Reporting to APA
InfoReach has integrated with TRADEcho. TRADEcho’s position as an Approved Publication Arrangement (APA), gives InfoReach clients a venue for publishing trades they have executed and meet their MiFID II requirements for post-trade reporting. TRADEcho, the suite of reporting services hosted and operated by the London Stock Exchange, delivered in partnership with Simplitium, has been facilitating European trade reporting for MiFID I for 10 years and is extending these services to cover the increased MiFID II requirements. TRADEcho’s services cover all MiFID II asset classes and provide firms with the tools they require to meet their pre and post-trade transparency obligations.
Reporting to ARM
InfoReach has joined the UnaVista partner program in order to help our clients meet their ARM (approved reporting mechanism) needs. As a partner we are able to access UnaVista testing environments to quickly onboard clients with their reports.
Risk Controls / Kill Switch
InfoReach trading solutions facilitate emergency kill functionality to immediately suspend any further automated trading and cancel all unexecuted orders submitted to the connected trading venues by any of the traders or algorithms. Automated protection functionality help to detect faulty patterns like submitting duplicate orders and overflowing with rejects, and is accompanied with circuit breakers to halt further trading.
InfoReach trading systems are equipped with state-of-the-art visual tools, notification mechanisms, data surveillance and reporting means to empower clients with sophisticated real-time monitoring, alerting, and decision making. Risk control functionality allows for automatically blocking or canceling orders that do not meet desired parametrization or are initiated by a trader without sufficient level of permissions, for not sending uncommonly large orders, for throttling and preventing excessive number of outgoing messages, etc. Orders blocked by pre-trade controls can be revised and resubmitted.