IHS Markit is preparing a registry of systematic internalisers (SIs) to help market participants comply with Markets in Financial Instruments Directive II (MiFID II) trade reporting obligations. The SI list will go live at the end of November on Markit’s Counterparty Manager web portal and will detail SIs operating across European Securities and Markets Authority (ESMA) RTS 2 asset classes including investment bonds, OTC derivatives, equities and equity-like instruments, and structured products.
The Markit SI service will address the MiFID requirement that when one party to a transaction executed off-venue or on a non-European venue is an SI, that party is responsible for reporting trades on a near real-time basis. This means knowing the SI status of counterparties will become a key part of trade reporting workflow.
Markit says regulators will list SI firms, but claims its register will provide more granular data. Brie Lam, Markit director of regulatory and compliance services, explains: “ESMA will publish a list of all firms that have notified their EU national competition authority (NCA) that they are SIs. However, if a dealer registers as an SI for only a narrow class of instruments and an investment firm transacts off venue with that dealer in a different type of instrument, that firm could be responsible for reporting. That’s why it’s important to know the full scope of the dealer’s SI registration at a granular level.”
She adds: “Dealers are likely to adopt a range of strategies in complying with the SI regime. Some will opt to register broadly across multiple asset classes and others will register on a granular basis for only the products in which they have significant trade volume. Our registry provides on-demand access to SI status, giving firms full pre- and post-trade transparency for whether they are subject to reporting rules on any given trade.”
Markit has designed the SI register to support trade reporting workflow and give investment firms a mechanism for disseminating SI status to Approved Publication Arrangements (APAs) and their clients. The service was developed in consultation with the International Swaps and Derivatives Association (ISDA), broker-dealers, APAs and other industry groups.