The effect of MiFID II is now being felt in some quarters in the wider financial world since our last post here.
This article on Finextra reports on this webinar run by the A Team Group entitled “MiFID II Trading Technology Requirements: What Worked and What Hasn’t?”. The report initially focuses on streams that firms thought “went well”, with for example 40% saying that comms recording falls into that category. The report then starts to look at problems caused by reference data issues, in particular relating to ISIN and LEI codes.
International Security Identification Numbers are now to be used for the reporting of derivatives. ISINs have proven challenging to adopt for derivatives use, due to the nature of the derivatives life cycle and also in terms of how the maturity is specified. The matter has proven to be even more challenging in commodity derivatives, where cascading contracts cause a particular headache. This article on the Markets Media web site looks at issues that ARMs have encountered with ISIN issuance. It also posits that so far, the use of ISINs has made it difficult for data published on Approved Publication Arrangements (APA) to be of use. Better aggregation possibilities and the start of Consolidated Tape Provider services would help to realise this advertised benefit of MiFID II.
LEIs, Legal Entity Identifiers, have also proven to be challenging. Introduced as part of the G20 2009 initiative to combat systemic risk (at the same time as EMIR, Dodd Frank etc), the uptake has been variable. MiFID II was to introduce a rule requiring investment firms to only trade with counterparties holding LEIs, but this was delayed for six months (see here). This article on the Practice Insight web site looks at such issues, and claims that banks have “lost interest” in LEIs. It remains to be seen if the six month delay is extended.
In the meantime, different lists are being updated. For example, ESMA’s central list of venues and SIs, which can be found here, now contains venues based in the UK.