ESMA provides guidelines on investment transaction reporting for MiFID companies

ESMA provides guidelines on investment transaction reporting for MiFID companies

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The European Securities and Markets Authority (ESMA) has issued a set of guidelines concerning transaction reporting, order record keeping and clock synchronisation for investment firms, trading venues, approved reporting mechanisms (ARMs) and competent authorities that fall with the EU Markets in Financial Instruments Directive (MiFID).

The guidelines will apply from 3 January 2018 and regulators and financial market participants are required to make every effort to comply with them.

The guidelines show how to construct a transaction report, and in what circumstances and where to send the report. The European regulator has split the gidelines into four separate sections – general principles, blocks, scenarios, and instruments. Below we take a brief look at each one of them.

General principles of transaction reporting

In general, transaction reporting aims at providing competent authorities with information about transactions, covering all relevant circumstances under which the transaction took place. The ESMA suggests reports should include data about a firm’s type of trading capacity (dealing on own account, matched principal or ‘any other capacity’); chains of reporting and transmission conditions; execution of a transaction on a trading venue; changes in ownership (acquisitions and disposals); as well as any exclusions from reporting, if applicable. The regulator noted that firms should not fill in fields where data is non-applicable under the circumstances defined in the field’s description.


The European regulatory body suggests transaction reports should have separate and independent of each other blocks, or collection of fields, each of which should address the relevant fields for a particular topic, with accompanying examples of how to populate these. The ESMA suggests the following blocks:

  • Block 1: Buyer/Seller identification – This block is necessary for market abuse purposes . The ESMA’s transaction reporting guidelines include different identification information requirements, depending whether a buyer/seller is eligible for a legal entity identifier (LEI), a natural person, a Non-EEA national with a single nationality, or has dual nationality (two EEA countries or an EEA country and a non EEA country).
  • Block 2: Decision maker for Buyer/Seller – Recommendations and advice do not constitute investment decisions and therefore where only a recommendation or a piece of advice takes place, the decision maker field should not be populated. In all other cases, firms should report whether the decision maker is the buyer/seller or a third party with power of representation for the buyer/seller.
  • Block 3 (combination of 1 and 2): Buyer/Seller and decision maker – This block contains recommendations for specific specific scenarios where the buyer/seller is a joint account (data is populated only once) or a deceased person.
  • Block 4: Investment decision within the firm field – This field should always be populated when the an entity is dealing on own account since it is putting its books at risk and is therefore deemed to be making an investment decision. The only exception to this is within the context of transmission where the firm is reporting as a receiving Investment Firm and dealing on own account.
  • Block 5: Execution within the firm field – The firm field should be populated in every transaction report. In cases where the decision about the execution was made by a client or by another person from outside the Investment Firm, the default value ‘CLIENT’ should be applied.
  • Block 6: Trading date time – Reported should be the point in time at which the transaction arises and the parties are committed to the transaction rather than the date time of any subsequent confirmation.
  • Block 7: Venue – the ESMA gives guidelines for reporting on executing a transaction on a trading venue in an anonymous order book, on a trading platform outside the EU in a non-anonymous order book, or on a trading venue by hitting its own order on an anonymous order book.
  • Block 8: Short selling flag – The section concerns scenarios where an investment firm short selling reportable shares or sovereign debt either on own account or on behalf of a client.The company should request the client to disclose whether it is selling short.
  • Block 9: Waiver, OTC post-trade and commodity derivative indicators – Waiver indicator and OTC post-trade indicator should be populated by a firm that submitted the order to the trading venue or made a report of the trade to the trading venue. The commodity derivatives indicator should be populated when a client has indicated it is reducing its risk or when the instrument is not a commodity derivative.
  • Block 10: Branches – The block allows firms to select different options, depending on whether a tansaction is executed on behalf of a client or on own account, or whether a transaction was carried out by EEA branches of non EEA firms.
  • Block 11: Status of transaction reports and corrections – There are various options for correcting a transaction reporting status – from entering a transaction not yet reported and correcting an existing inaccurate transaction report, to intra-day cancellations and amendments of an existing transaction report, to submitting a new transaction report or cancelling one.
  • Block 12: Change in notional – Reporting firms can choose to increase or decrease a notional, as well as full early termination.


The regulator’s guidelines provide examples based on a number of different trading scenarios. In particular, transactions resulting from transmissions of orders, grouped orders and the provision of Direct Electronic Access (DEA) are presented. Click here to read the full ESMA report.


The section provides guidelines on how to correctly report and categorize trading instuments. For example, where a derivative instrument is on another derivative instrument (an option on a future on an equity), the International Securities Identification Number (ISIN) to be reported is the direct underlying instrument i.e. the future contract in this example rather than the ultimate underlying instrument (equity here). The ESMA gives guidance for various financial instruments, but most examples are focused on derivatives given that these financial instruments have a more complex reporting pattern.

The ESMA is an independent EU authority that directly supervises and safeguards the EU financial markets. It has established a single rulebook for EU financial markets and promotes the convergence of the regulatory bodies of EU countries. In addition, it also assesses risks to investors, markets and financial stability.

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