MiFID/MiFIR Solutions – Supporting the Transformation of the European Securities Market

The Markets in Financial Instruments Directive (MiFID) of 2004 is a European Union law which aims to improve and harmonize regulation for investment services. National Competent Authorities (CAs or NCAs) are obligated to collect transaction data from national entities as well as branches situated in the respective country and forward that data to other affected Competent Authorities.

In 2011 Level 2 of the directive has been adopted by the European Commission, allowing the European Securities and Markets Authority (ESMA) to draft technical standards for the realization of the directive. To harmonize and unify the exchange of transaction data between all participating CAs, ESMA defined a set of rules and schemas that must be implemented by all participating regulators.

The directive consists of the Transaction Reporting Exchange Mechanism (TREM), responsible for collecting and distributing data from national entities participating in market transactions, as well as Access to Trade Repositories System (TRACE) which shall provide access to transaction traded via independent Trade Repositories.

Transaction Reporting Exchange Mechanism (TREM)

All regulators must collect transaction data from their national entities via Data Reception Interface (DRI). ESMA has defined strict regulations regarding deadlines: transaction reports must be submitted daily. Any executed transactions must be reported the following working day. Pending feedback files must be fetched every day. Manual fetching and submitting of files is unreasonable, the system should work independently. For this reason, a web service should be used to facilitate the automated exchange of data between the submitting entities and the regulator.

Specific rules defined by ESMA are used to validate the submitted data. The validation result, be it positive or negative, must be returned to the sender as a feedback file. If the validation has been successful, the origin of the transaction determines the further procedure. Transactions submitted by a national entity must be routed to other regulators affected by the transaction. Affected CAs are to be identified by a ruleset defined by ESMA. Once a day all transactions, which are to be routed to other regulators, will be submitted to the HUB.

AMANA Transaction Manager

To fulfill the requirements for regulators specified by ESMA, AMANA created the Transaction Manager, which can handle the whole process without user interaction. Submitted files are validated, routed, consolidated and submitted to the ESMA HUB automatically. Furthermore, any required feedback files are created and provided similarly. Automation is a key requirement for the implementation of TREM. The specified deadlines require daily collection and distribution of transaction data which could not be reasonably accomplished if user interaction were necessary.

The AMANA Transaction Manager is fully scalable. The system consists of the following independent modules:

  1. Validation
  2. Feedback Creation
  3. Routing
  4. Consolidation
  5. Feedback Management
  6. Statistics

All modules can be combined to complete the respective workload in time. This architecture allows the regulator to fulfill the daily deadlines set by ESMA, regardless of the transaction volume of the country.

AMANA is proud to announce that the Financial Market Authority (FMA) Liechtenstein will be the first regulator to use the Transaction Manager in production to fulfill the requirements of ESMA.

The Transaction Manager is scheduled to take part in all phases of the testing strategy defined by ESMA. The first integration testing phase between the regulators will start in September 2017. Prior to this phase national submitting entities should be able to test their systems against the Data Reception Interface. Since this interface is not standardized by ESMA, an early release of its specification is necessary to enable the submitting entities to implement their systems accordingly. The Transaction Manager’s DRI specification is currently scheduled to be released in April, with an accompanying test phase in July and August.

In addition to the core functionality, the Transaction Manager also provides a user interface to monitor and view transactions and feedback files as well as compiled statistics. Transaction data are stored in a relational database, so it can be used as a source for further business intelligence tasks.

Following the go-live in January the Transaction Manager will be extended by further reporting and analysis features as well as further possibilities to integrate and use the transaction data in existing systems.

If you are interested in a more detailed description of the system or have further questions, please don’t hesitate to send us an e-mail or use the contact form below.

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