Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Priya Raj

Why every Trading Participants need be familiar with Regulatory Reporting!

Recommended Posts

The evolving requirements of ESMA and Market Abuse Regulation (MAR) persuade Reporting Entities to strategize the reporting structure of a trade. Since MiFID II implementation, it is aiming at increasing investor protection by creating a more efficient, risk-aware and transparent market for investment services and activities.

This regulatory initiative has been described as the “biggest overhaul of financial markets regulation in the EU for a decade” and provides a significant extension of the previous MiFID regulation with a broader regulatory scope and more stringent rules for investment firms — such as banks and other providers of investment services — as well as for regulated markets and data reporting services providers.

To comply with the evolving regulatory processes, every financial firm needs to stay familiar with the MiFID II’s reporting processes. This article will provide you an overview of ESMA’s MiFID II reporting structure and its flow.

MiFID II Reporting to the Regulatory Bodies:

What is a Financial Regulatory Body & what is the major role played!

A financial regulatory body, regulates the financial firms which provides services to consumers and maintains the integrity of the financial markets. As a supervisory authority, every regulatory bodies aim at the fair and orderly operation and the transparency of the financial markets by ensuring that listed companies provide correct and complete information. It enables the establishment of financial services by verifying that financial institutions comply with rules of conduct.

The below diagram emphasizes the reporting scenarios that market participants will need to adhere in order to implement the standardized regulatory compliance.

 Transaction Reporting

The Transaction Reporting adheres under the RTS 22, which requires the investment firms & trading venues to report complete and accurate details of transactions in financial instruments no later than the close of the following working day as per Markets in Financial Instruments Regulation (MiFIR).

The technology enablement should integrate 65 required transaction reporting fields however it should also ensure the data security. Also there is a need to certify connectivity to the new and existing ARMs, and help the clients for submitting initial and amended transaction reports.

Transparency Reporting

The MIFID II / MiFIR transparency reporting consist of 2 core transparency obligations.

 

  1. Pre-trade transparency - Designed to provide market participants with near real time publication of basic trade data.

  2. Post-trade Transparency - Designed to provide market participants with near real time publication of executed trades

 

Once the participants submit their reports, Approved Publication Arrangements (APAs), and Consolidated Tape Providers (CTPs) might further report this to NCA. The transparency could help the authorities to monitor the complete risk and the market exploitation.

As per RTS 1 - Transparency requirements for Trading Venues and Investment firms for Shares / depository receipts / Exchange traded funds / certificates will be handled and this transaction has to be reported within 0 to 15 minutes.

RTS 2 - Transparency requirements for Trading Venues and Investment firms for Bonds / Structured Finance products / Emission allowances & derivatives will be handled and this transaction has to be reported within end of the transaction day.

Best Execution Reporting

As per PwC, Best execution is achieving the best possible result for customers when executing their orders via execution venues or OTC. MiFID II looks for transparency over financial institution order execution and the Regulatory Authority, which requires the investment firms to evaluate whether the execution quality achieved corresponds to the quality promised in their best execution policies.

As per RTS 27 (For Trading Venues), This Regulation lays down obligations on execution venues to publish data relating to the quality of execution of transactions. It shall apply to trading venues, systematic internalizes, market makers, or other liquidity providers.

As per RTS 28 (For Investment Firms), This Regulation lays down rules on the content and the format of information to be published by investment firms on an annual basis in relation to client orders executed on trading venues, systematic internalizer, market makers or other liquidity providers or entities that perform a similar function to those performed by any of the foregoing in a third country.

Position Reporting

According to the ESMA, investment firms should provide a complete breakdown of positions held on own account and on behalf of clients as the investment firm can end up holding a position.

As per RTS 21, Trading Participants must report on a daily basis a complete breakdown of their positions in commodity derivatives, emission allowances and derivatives of emission allowances, client & Clients of those clients & so on to the end client.  On weekly basis the aggregate positions held will be published. The limitation per file for reporting is restricted as 50,000 records per file and if the count exceeds, then it will be submitted as multiple reports.

ESMA highlighted that it is trade participants’ responsibility to assess the transaction results.

Algorithmic Trading Reporting

Under MiFID II, EU regulators began enforcing rigorous requirements on firms using algorithmic trading strategies and systems, which has been explained in Regulatory Technical Standard 6 (RTS 6). Also, firms need to carry out an annual self-assessment and validation of their algorithmic trading activity against the regulatory requirements. Moreover, these assessments result can also be requested by regulators at adhoc basis.

As per RTS 6, As part of its overall governance and decision making framework, an investment firm shall establish and monitor its trading systems and trading algorithms through a clear and formalized governance arrangement, having regard to the nature, scale and complexity of its business.

MiFID II needs the firms to ensure that outsourced arrangements should comply with RTS 6.

Financial Instruments Reference Data Reporting

As per ESMA’s Reporting Instructions, trading venues firms need to submit identifying reference data for the relevant financial instruments to their competent authorities who are required to transmit it to ESMA for subsequent publication on its website. This is in particular required to support the scope of transaction reporting under MiFIR, as well as market abuse surveillance activities under MAR.

As per RTS 23, The Markets in Financial Instruments Regulation (MiFIR) requires trading venues to provide competent authorities with identifying reference data for the purposes of transaction reporting. For the purpose of effective market monitoring by competent authorities, reference data for financial instruments should be reported in a consistent format and according to specified standards.

 Double Volume Cap Reporting

This reporting limits the trading in the Dark Pools by involving a CAP on the use of 2 transparency waivers.

As per London Stock Exchange, there are 2 systems;

  • Reference Price Waiver (RPW)
    Systems matching orders based on the midpoint within the current bid and offer process of the trading venue where that financial instrument was first admitted to trading or the most relevant market in terms of liquidity.

  • Negotiated Trade Waiver (NTW)
    Systems that formalize negotiated transactions.

As per RTS 3, This Regulation sets out, the details of the data requests to be sent by competent authorities and the details of the reply to those requests to be sent by trading venues, approved publication arrangements (APAs) and consolidated tape providers (CTPs), for the purposes of calculating and adjusting the pre-trade and post-trade transparency and the trading obligation for derivatives as well as to determine whether an investment firm is a systematic internalizer. Total volumes of trading reported separately for each trading venue.

The looming MiFID II regulatory challenges can only be addressed by partnering with Sensiple the right RegTech solution provider, who can alleviate the challenges ahead. With the technology enablement, the firms can transform the regulatory challenges by automating end-to-end regulatory data collection, validation and submission. It also validates the risk and manages the exception along with the end-to-end automated regulatory processes without any manual intervention and convert it into acceptable MiFID II/MiFIR regulatory requirement format with one-time configuration.

Share this post


Link to post
Share on other sites

The evolving requirements of ESMA and Market Abuse Regulation (MAR) persuade Reporting Entities to strategize the reporting structure of a trade. Since MiFID II implementation, it is aiming at increasing investor protection by creating a more efficient, risk-aware and transparent market for investment services and activities.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • YUM Yum Brands stock, nice breakout with volume +34.5%, from Stocks to Watch at https://stockconsultant.com/?YUM
    • Date: 3rd April 2025.   Gold Prices Pull Back After Record High as Traders Eye Trump’s Tariffs.   Key Takeaways:   Gold prices retreated after hitting a record high of $3,167.57 per ounce due to profit-taking. President Trump announced a 10% baseline tariff on all US imports, escalating trade tensions. Gold remains exempt from reciprocal tariffs, reinforcing its safe-haven appeal. Investors await US non-farm payroll data for further market direction. Fed rate cut bets and weaker US Treasury yields underpin gold’s bullish outlook. Gold Prices Retreat from Record Highs Amid Profit-Taking Gold prices saw a pullback on Thursday as traders opted to take profits following a historic surge. Spot gold declined 0.4% to $3,122.10 per ounce as of 0710 GMT, retreating from its fresh all-time high of $3,167.57. Meanwhile, US gold futures slipped 0.7% to $3,145.00 per ounce, reflecting broader market uncertainty over economic and geopolitical developments.   The recent rally was largely fueled by concerns over escalating trade tensions after President Donald Trump unveiled sweeping new import tariffs. The 10% baseline tariff on all goods entering the US further deepened the global trade conflict, intensifying investor demand for safe-haven assets like gold. However, as traders locked in gains from the surge, prices saw a modest retracement.   Trump’s Tariffs and Their Market Implications On Wednesday, Trump introduced a sweeping tariff policy imposing a 10% baseline duty on all imports, with significantly higher tariffs on select nations. While this move was aimed at bolstering domestic manufacturing, it sent shockwaves across global markets, fueling inflation concerns and heightening trade war fears.   Gold’s Role Amid Trade War Escalations Despite the widespread tariff measures, the White House clarified that reciprocal tariffs do not apply to gold, energy, and ‘certain minerals that are not available in the US’. This exemption suggests that central banks and institutional investors may continue favouring gold as a hedge against economic instability. One of the key factors supporting gold is the slowdown that these tariffs could cause in the US economy, which raises the likelihood of future Federal Reserve rate cuts. Gold is currently in a pure momentum trade. Market participants are on the sidelines and until we see a significant shakeout, this momentum could persist.   Impact on the US Dollar and Bond Yields Gold prices typically move inversely to the US dollar, and the latest developments have pushed the dollar to its weakest level since October 2024. Market participants are increasingly pricing in the possibility of a Fed rate cut, as the tariffs could weigh on economic growth.   Additionally, US Treasury yields have plummeted, reflecting growing recession fears. Lower bond yields reduce the opportunity cost of holding non-yielding assets like gold, making it a more attractive investment.         Technical Analysis: Key Levels to Watch Gold’s recent rally has pushed it into overbought territory, with the Relative Strength Index (RSI) above 70. This indicates a potential short-term pullback before the uptrend resumes. The immediate support level lies at $3,115, aligning with the Asian session low. A further decline could bring gold towards the $3,100 psychological level, which has previously acted as a strong support zone. Below this, the $3,076–$3,057 region represents a critical weekly support range where buyers may re-enter the market. In the event of a more significant correction, $3,000 stands as a major psychological floor.   On the upside, gold faces immediate resistance at $3,149. A break above this level could signal renewed bullish momentum, potentially leading to a retest of the record high at $3,167. If bullish momentum persists, the next target is the $3,200 psychological barrier, which could pave the way for further gains. Despite the recent pullback, the broader trend remains bullish, with dips likely to be viewed as buying opportunities.   Looking Ahead: Non-Farm Payrolls and Fed Policy Traders are closely monitoring Friday’s US non-farm payrolls (NFP) report, which could provide critical insights into the Federal Reserve’s next policy moves. A weaker-than-expected jobs report may strengthen expectations for an interest rate cut, further boosting gold prices.   Other key economic data releases, such as jobless claims and the ISM Services PMI, may also impact market sentiment in the short term. However, with rising geopolitical uncertainties, trade tensions, and a weakening US dollar, gold’s safe-haven appeal remains strong.   Conclusion: While short-term profit-taking may trigger minor corrections, gold’s long-term outlook remains bullish. As global trade tensions mount and the Federal Reserve leans toward a more accommodative stance, gold could see further gains in the months ahead.   Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Andria Pichidi HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • AMZN Amazon stock, nice buying at the 187.26 triple+ support area at https://stockconsultant.com/?AMZN
    • DELL Dell Technologies stock, good day moving higher off the 90.99 double support area, from Stocks to Watch at https://stockconsultant.com/?DELL
    • MCK Mckesson stock, nice trend and continuation breakout at https://stockconsultant.com/?MCK
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.