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JWG Takes MiFID Impact on Reference Data to High Granularity

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The MiFID Joint Working Group has taken the bull by the horns with respect to entity identifiers and their role in the forthcoming EU Markets in Financial Instruments Directive, much hullabaloo about which continues to bubble in the London marketplace if nowhere else.

The latest JWG white paper – described on Page 4 and available from the www.mifid.com web-site – attempts to set the market a-chattering with its discussion on how it expects MiFID to impact the reference data marketplace. It also makes a whole host of proposals that actually make the reference data obligations posed by MiFID appear, well, almost under control.

But recommendations are what they are, no more, no less. And it’s going to take some big decisions by key market practitioners to make these proposals a reality that can cater to the wide-ranging requirements of the MiFID regulations. The JWG itself acknowledges as much. It outlines the diverging opinions about just which set of unique identifiers should be adopted by the marketplace to meet their MiFID obligations.

Indeed, minutes of the latest meeting on January 17 of the JWG’s Reference Data Subject Group detail a “heated open discussion” over whether systematic internalizers are likely to warrant identification as MICs (ISO 10383) or not.

The arguments went thus:

“(The) Argument ‘for’ allocating MICs to cover Systematic Internalizers (SIs) centres around the removal of uncertainty by assigning such an identifier. A MIC code (ISO 10383) is an extant market identifier, assigned to business entities operating regulated markets plus most entities likely to be classified as Multilateral Trading Facilities (MTFs). Another identifier might be a BIC code. Swift raised a comment as to why BICs (or MICs) cannot be a long-term solution for the identification of Systematic Internalizers, particularly as most (if not all SIs) are likely to be institutions with BICs already assigned. A broker-dealer running an MTF would be assigned a MIC; a broker-dealer internalising a trade would be identified by its BIC.”

And:

“(The) Argument ‘against’ allocating a MIC arises from the fact that a SI does not actually operate a regulated market. An SI is a role (one of many roles that an investment firm might play). The industry must be mindful not to overload the identifiers semantically, especially if there is a need to identify Places of Quote (POQs) post-MiFID. In response, the counter-suggestion is the SIs be awarded an IBEI while regulated markets and MTFs continue to be assigned MICs. There is also the potential for serious symbo-logy confusion if SIs are identified by BICs/MICs, and also IBEIs over time!”

The characterization of these discussions as “heated” may, in fact, be an understatement. Certainly, as A-Team Group editorial types ready themselves for the launch of our very own MiFID Monitor newsletter next month, this for and against the use of MICs to cover SIs was raised on several occasions, and will be the subject of further discussion in our inaugural February issue. Sign up for a launch alert at www.mifidmonitor.com. That said, the exchange at the meeting may demonstrate that the granularity of discussion of this particular point may be far deeper than many other MiFID-related topics, so perhaps the industry should be giving itself a pat on the back for once.

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