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A-Team Insight Blogs

ESMA has Published Its Technical Standards for MiFIR!

By Chris Pickles, Co-Chair of FIX Trading Community’s Reference Data Subgroup and Member of the Bloomberg Open Symbology Team

At last the document has arrived – you can find it on the ESMA web site at http://tinyurl.com/nh5spx7. And there are changes in there that are very significant to anyone involved in reference data, in compliance, in trading – almost any aspect of an investment firm, an exchange, an ARM, whatever.

This is about the fundamental data that financial institutions will have to have access to, manage and use in order to operate their businesses and comply with EU/EEA regulations. In terms of reference data, one of the key recommendations of ESMA to the European Commission in this document is that all instruments admitted to trading on any exchange or trading venue should be identified by an ISIN (International Securities Identification Number).

One victory for ‘standards geeks’ is that ESMA has accepted that its proposal for the use of Alternative Instrument Identifiers (AIIs) to identify exchange-traded derivatives does not meet the requirement. AIIs are not a recognised industry standard, and they are also not used anywhere outside of the EEA.

One of the reasons why the concept of the AII was created was the recognition in the UK back in the days of MiFID I implementation that the then ISO 6166/ISIN standard would not allow for the identification of the vast quantity of derivatives instruments in the marketplace. Since then, the ISO 6166 standard has been enhanced and can now cope with a larger number of financial instruments.

The total number of ISINs that has been allocated has also increased significantly during ESMA’s consultation phase on this topic. The Association of National Numbering Agencies (ANNA) indicated in its 2014 Annual Report that some 13 million ISINs had been issued to date (ISINs first began to be issued in 1983). A public presentation by ANNA earlier this month indicated that that number had risen to some 31 million, which would mean that more ISINs have been allocated in the last 12 months than have been allocated since the ISIN standard was first created over 30 years ago.

This is where ideas differ about “how big is Big Data?” The number of ISINs has gone up by around 18 million in one year, but the number of financial instruments that major data vendors are having to manage has gone up by over 60 million over the last 12 months.

Market participants, infrastructures and regulators will now have to find a way to get the necessary number of ISINs allocated before MiFIR comes into force in January 2017. That work will be up to the individual ISIN issuers – the ‘national numbering agencies’ – for each of the 31 EEA countries. Only one organisation per country is currently allowed to issue ISINs, and this extra work will place a significant burden on them.

In its Technical Standards proposals, ESMA has also commented on data elements that are included in the current version of the Market Model Typology (MMT), which is maintained by the FIX Trading Community. The specialist subgroups that it has created to examine the requirements of MiFID II / MiFIR and of ESMA’s new proposed Technical Standards will now be adding this changed set of requirements to its work in order to ensure that the FIX Protocol, as an open, free and non-proprietary standard, is fully able to meet the financial sector’s needs and in good time.

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