About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Xtrakter’s Response to CESR MiFID Review Highlights Costly Challenges of Client Identification

Subscribe to our newsletter

Following the publication of the Committee of European Securities Regulators’ (CESR) consultation papers on MiFID earlier this year, industry groups have submitted their responses to the proposals, including providing feedback on the potential data costs and system requirements to cope with the changes. To this end, the British Bankers’ Association (BBA) and Xtrakter Transaction Reporting Working Group is one such group that has raised the issue of the “large start up costs and ongoing maintenance costs” of collecting client identifiers.

CESR asked for feedback to its recommendations to ascertain just how much of a challenge the data requirements of MiFID mark two will prove for market participants in order to feed this information back to the European Commission. Firms had until 4 June to submit their responses to the 44 questions contained within the non-equity markets transparency consultation paper, which detailed a whole host of new derivatives data requirements.

As previously noted by Reference Data Review, the data supply chain will certainly be altered by these new requirements and some degree of investment will be necessary in order to consolidate and report this data publicly. Accordingly, the Xtrakter working group response identifies a number of logistical problems that need to be addressed by CESR before any work can begin, including who pays for the identifier itself.

“A central utility would need to be set up to issue and maintain client IDs. Not only will there be costs in establishing and maintaining the register, there will also be a question as to who should pay for the establishment of an ID for a particular client. Decisions would have to be taken to decide whether the client directly paid for the establishment of his unique ID or whether the first investment firm who applied (on behalf) of the client for an ID would pay. Should a decision be taken for the latter option, it would mean that other investment firms who subsequently use that client ID bear no direct cost for establishing or using the ID,” states the response.

This is quite clearly an argument that has resulted from the current charging practices used by some data vendors with regards to end user licenses (a serious bone of contention within the industry at the moment). The group, which represents the interests of the BBA, the Association for Financial Markets in Europe (AFME) and the Futures and Options Association (FOA), therefore seems keen to ensure that the regulatory community is apprised of the issue before it rears its ugly head within the MiFID reporting sphere for unique independent client identifiers.

In general, the group is in favour of such identifiers but is also asking for clarity from the regulatory community that they are fully using the existing identifiers out there on the market. After all, if you don’t have to reinvent the wheel, why go to all that effort?

There is also need for a degree of clarity on what exactly is meant by the “ultimate client”, according to the Xtrakter group. “In the case of an investment management client, will the reporting requirement remain at the portfolio manager fund manager level? We are of the view that the sell side firm’s client reporting obligation should remain at the portfolio manager level, as the portfolio manager is both the investment decision maker and also typically the EEA regulated entity,” it suggests. This will have a significant impact on the level of data granularity required to be stored and maintained by the firm, and thus the complexity of the overall data management structure.

The Xtrakter group notes the usual data protection issues that crop up when customer data is shared by regulators across jurisdictions, which must also be taken into consideration. It also highlights the important quality and service level considerations of the maintenance of this data with regards to scope of use and granularity.

Given the number of other related regulations floating about in the regulatory ether at the moment, the group also asks for a more tied up approach to identifiers for reporting purposes. “It would greatly assist both investment firms and regulators if the client ID for transaction reporting purposes could also be used for other regulatory reporting purposes such as ‘single customer view’ purposes and ‘large exposures’ reporting purposes,” it states.

The checklist for an identifier, according to the group, should comprise: widespread coverage; fair access and reasonable costs; sufficient granularity and a hierarchical structure for the required data items to be included; that it is available on a centralised register (like the US Office of Financial Research or a European equivalent, perhaps); and supported by clear service level agreements (SLAs). It agrees that the CESR suggestion of the Swift Bank Identifier Code (BIC) as the most appropriate identifier based on its ubiquity has some validity, but cautions that a lot of issues still remain with the identifier before it can be used as such. In the meantime, it suggests the use of proprietary identifiers may be more practical.

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: The future of market data – Harnessing cloud and AI for market data distribution and consumption

25 June 2025 10:00am ET | 3:00pm London | 4:00pm CET Duration: 50 Minutes Market data is the lifeblood of trading, but as data volumes grow and real-time demands increase, traditional approaches to distribution and consumption are being pushed to their limits. Cloud technology and AI-driven solutions are rapidly transforming how financial institutions manage, process,...

BLOG

AI in Finance: Key Insights from the SEC’s Landmark 2025 Roundtable

In late March, the U.S. Securities and Exchange Commission (SEC) hosted a landmark roundtable on artificial intelligence (AI) in financial services. Held in Washington, D.C., the event brought together regulators, technologists, market participants, and legal experts to explore the evolving landscape of AI – from transformative innovation to systemic risk. This wasn’t about rulemaking –...

EVENT

RegTech Summit New York

Now in its 9th year, the RegTech Summit in New York will bring together the RegTech ecosystem to explore how the North American capital markets financial industry can leverage technology to drive innovation, cut costs and support regulatory change.

GUIDE

AI in Capital Markets: Practical Insight for a Transforming Industry – Free Handbook

AI is no longer on the horizon – it’s embedded in the infrastructure of modern capital markets. But separating real impact from inflated promises requires a grounded, practical understanding. The AI in Capital Markets Handbook 2025 provides exactly that. Designed for data-driven professionals across the trade life-cycle, compliance, infrastructure, and strategy, this handbook goes beyond...