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Andy Green: “What’s at the end of your ARM……more ARM’s ?”

The Infoline MiFID II / MiFIR & EMIR Reporting conference in London on the 25-26 February was again an informative and interesting event. Enhanced by representation from ESMA, FCA, ANNA, SEC and other Regulators. As well as Industry experts.

The representatives from the Regulators, Speakers and panellists did an excellent job of mapping out the timeline and challenges that MIFIDII/R and EMIR present the Industry. Whilst also reinforcing and reminding the audience of the behaviour and standards they expect.

There are however still many grey areas, one obvious one is the proposed one year delay in the MIFIDII/R implementation, which although widely accepted as being a reality has not been yet been approved by the Law Makers.

One of the most stimulating areas of discussion turned out to be ‘what is an ARM’ (Authorised Reporting Mechanism) and more importantly who may have to register as one. Throughout the event it became clear that there will be many organisations who want to be registered and regulated by ESMA as ARMS. But during Anna Fernandenz’s (FCA) presentation, she highlighted that under the new MIFID legislation other DRSP’s (Data Reporting Service Providers) may have to register as ARM’s. When questioned on this she went on to say that any entity that “slices, dices or cooks” data for another entity may have to register as an ARM. This is meant to enable ESMA and the NCA’s to have oversight of third party’s involvement in the external reporting process.
The question was then asked would this also impact an organisation that had a central reporting entity that reported for other entities within that organisation. The answer was in theory yes, but the intended impact was still being discussed by the European Commission and ESMA. So we will have to wait and see. But rather than there being a hand full of ARM’s, we may end up with an armful of ARMS in Europe.

Rob Bari from Barings and one of the chairs of the event, highlighted in one of her introductions that it was apparent that the underlying theme for the whole conference was Data and Data Quality. It came up time and time again that data needed to be correct and clean before it was received by the Regulators and that the utilisation of standards would only become more visible.

The use of the ISIN as a the Product Identifier was again reinforced, even with a backdrop of concern over the limitations of ISIN’s especially in the OTC’s and Listed space. Uwe Meyer from ANNA Secretariat stressed that because ISIN could in effect be pre ordered there should be no issues for derivatives or other products high issuance volumes. A question was raised from the audience about the need for “super” ISIN’s to link the same derivative product (based on the economics) that were available on multiple platforms and how this would be managed. To which the response was it was being reviewed. The discussion on the GLIEF (Global Legal Entity Identifier Foundation) presented delegates with the sense that by the middle of 2016 it would be ready to be used to meet regulatory mandates. Such as it mandatory use by Trade Repository’s under EMIR.

For me the event highlighted again how much still needs to be understood and to be done. It is apparent that the Regulators believe that for MIFID II/R the path they have set is clear and although there will be questions, it is one we will all have to follow.

However with everyone’s attention on MIFIDII are Firms also able to prepare themselves for the EMIR RTS rewrite which is due to go live in March 2017. The impact is significant and must not be under estimated. There are 44 new fields and amongst other requirements the demand for more granularity in valuations and collateral report and the requirement to split complex trades into their component legs. A full review of the impact can be found in the following Risk Focus article published by DerivSource (http://derivsource.com/content/emir-trade-reporting-after-2-years-and-road-ahead/)

 

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