Communication with regards to Brexit implications on MiFIR transaction reporting, ESMA databases and MiFID II calculations

  • ESMA statement on the use of UK data in ESMA databases and performance of MiFID II calculations in case of a no-deal Brexit

On 5 February 2019, ESMA issued a statement in relation to the impact on ESMA’s databases of a no-deal Brexit with the United Kingdom (UK) leaving the European Union (EU) on 29 March 2019, 00:00 CET (“the withdrawal date”) without a withdrawal agreement.

The public statement informs stakeholders on ESMA’s approach to all ESMA IT applications and databases in case of a no-deal scenario and focuses in particular on the MiFID II/MiFIR transparency calculations performed by the various ESMA databases (Financial Instruments Reference Database (FIRDS), (Financial Instruments Transparency System (FITRS), double volume cap mechanism data (DVC system)) as well as the annual ancillary activity calculations.

  • Implications of a no-deal Brexit on the MiFIR transactions reporting regime

The CSSF, as competent authority for MiFIR in accordance with Article 1(2) of the law of 30 May 2018 on markets in financial instruments, wants to highlight certain points in relation to the obligation to report transactions as foreseen by Article 26 MiFIR in the special context of the United Kingdom’s withdrawal from the European Union.

Approved reporting mechanisms (ARM)

The CSSF encourages investment firms and credit institutions falling under the scope of the MiFIR reporting obligation and using the services offered by an ARM established in the UK to contact their ARM to verify whether continuity of service will be ensured after the withdrawal date. In compliance with EU regulations, as of the withdrawal date, ARMs established in the UK will be third-country entities.

Credit institutions and investment firms must ensure that they continue to comply with Article 26 (7) MiFIR after the withdrawal date.

Transmission of an order under Article 4 of the Commission Delegated Regulation (EU) 2017/590 (“RTS 22”)

Article 3 of RTS 22 provides that an investment firm or a credit institution shall not be deemed to have executed a transaction where it has transmitted an order in accordance with Article 4 of RTS 22.

One of the 3 conditions provided by Article 4(1) to be fulfilled in the context of a transmission of an order is that the receiving firm is subject to Article 26(1) MiFIR and agrees either to report the transaction resulting from the relevant order or to transmit the order details in accordance with this Article to another investment firm or credit institution.

Credit institutions and investment firms must ensure that their transmission agreements remain in compliance with European regulations or ensure themselves the obligation to report transactions if the conditions listed under article 4(1) of RTS 22 are no longer met after the withdrawal date.

Financial instruments falling within the reporting scope

Pursuant to Article 15(1) of RTS 22, reporting entities shall have mechanisms in place to avoid reporting of transactions in financial instruments which are not within the scope of MiFIR. The UK withdrawal from the EU risks to have a considerable impact on the instruments’ scope.

Finally credit institutions and investment firms should take the necessary precautions, without prejudice to the Brexit outcome, to ensure that their transaction reporting systems will still comply with the MiFIR requirements after the withdrawal date.

Please note that this press release takes into account the current relevant legislation. The CSSF’s view may be affected by future changes of legislation or of international positions touching Brexit matters.