The SmartStream Reference Data Utility (RDU) is finalising a service – the Systematic Internaliser Register – that will allow systematic internalisers (SIs) within the scope of Markets in Financial Instruments Directive II (MiFID II) to publish financial instruments for which they will offer SI services and firms to identify whether counterparties are SIs and therefore responsible for pre- and post-trade reporting under with the regulation.
The service has been developed in collaboration with Deutsche Börse, which plans to use SmartStream RDU reference data tools in its forthcoming Regulatory Reporting Hub. The hub bundles all the exchange group’s regulatory compliance solutions in one platform.
The Systematic Internaliser Register service plugs a significant gap in MiFID II reporting caused by the European Securities and Markets Authorities’ (ESMA) note that it will not publish a list of SIs before the January 3, 2018 MiFID II compliance deadline and does not expect to publish ISIN to SI relationships before the end of 2018. The service will go into quality assurance testing in November 2017 and will be in production in December 2017.
The SI register provides a web-based user interface and batch file facility for SIs to contribute data about their instrument coverage to the service – contribution by sub-asset class for fixed income securities and derivatives is also supported – and assigns ISINs to contributed data. SI codes are enriched with Legal Entity Identifiers (LEIs), LEIs and ISINs are validated, and subscribers to the service can consume SI to ISIN relationships using flat files or REST application programming interfaces (APIs).
The service is expected to be particularly useful in identifying SIs that are party to transactions made off trading venues and must take responsibility for pre- and post-trade reporting. MiFID II requirements specify that if one counterparty is an SI, the SI reports, whether it is the buyer or seller. If both counterparties are SIs, the seller reports, and if neither counterparty is an SI, the seller reports.
Joseph Turso, vice president of product management at the SmartStream Reference Data Utility, and a keynote speaker at tomorrow’s A-Team Group RegTech Summit for Capital Markets in London, says: “The Systematic Internaliser Register leverages MiFID II services we offer. It is getting a good reception from the backers of the SmartStream RDU – Goldman Sachs, JPMorgan Chase and Morgan Stanley – and other large broker-dealers we are talking to.” The company’s available MiFID II solutions cover pre-trade, post-trade and transaction reporting.
Georg Gross, head of regulatory services at Deutsche Börse, comments: “The SmartStream RDU Systematic Internaliser Register will be extremely valuable to our clients as it eliminates the need to bilaterally communicate SI status in trade messages.” By centralising the collection and distribution of SI ISIN data, the service also avoids fragmented collection of the data by individual firms that must comply with MiFID II.