In January 2018, the European Union started implementing the second version of the Markets in Financial Instruments Directive (MIFID II). The comprehensive regulations were meant to protect investors by putting in place measures to prevent exploitation by investment firms. The idea to improve MIFID came after the global financial crisis of 2008/9.
On the 29th of July, the European Securities Markets Authority (ESMA) updated the question and answer (Q&A) in under the MIFID or the Markets in Financial Instruments Regulation (MiFIR). The Q&A document of the MiFIR is a comprehensive 64-page document that aims to answer the key questions about the regulations. To provide more clarity on emerging issues, ESMA regularly updates the Q&A document. Prior to this week’s update, the organization had provided an update in February this year.
The latest update deals with the reporting obligations for financial instruments that have no expiry date. The new answer said that for instruments that have no defined expiry date but whose reporting is mandatory under MIFID rules. The Q&A clarified that in such a case, the field should be populated with the value 9999-12-31 in accordance with the ISO format. Companies should do this until such a time when the expiry date becomes determined by the regulators. When this happens, reporting companies like investment firms, trading venues, systematic internalisers, and ARMs on compliance with the reporting provisions of MiFIR.
This update came after another one was posted in April. The previous update related to how operators of trading venues report instrument reference data in accordance to article 23 of MIFID. In this update, ESMA said that that the obligation to supply the reference data will only be triggered from “from the moment of the inclusion of the instrument into the list”.
Reporting was one of the most consequential issue in the MIFID regulations. This is because companies like investment banks, brokers, and research firms are mandated to report on a wide range of things. For example, investment researchers must report when they publish reports on companies, they have a conflict of interest in.
As the regulations become more polished, the Q&A document will continue being updated. Therefore, if you run a company that reports to ESMA, it is essential that you stay updated on the Q&A section and the regulators website. This is because failure to comply on ESMA provisions attracts huge fines.