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By Stefan Schaaf, Frankfurt
The article was published first in Börsen-Zeitung on 12 November 2016 in German and translated into English.
Deutsche Börse is creating a regulatory reporting hub at its Eschborn headquarters to aid financial market players, among other things, to meet their MiFID II reporting requirements. “We are planning a European solution to enable us to support our clients in managing increasingly complex tasks,” Head of Deutsche Börse's Regulatory Services Georg Groß told Börsen-Zeitung.
When Europe's revised Markets in Financial Instruments Directive (MiFID II) and the related Markets in Financial Instruments Regulation (MiFIR) go into effect on 1 January 2018, market players will have to fulfil far more comprehensive reporting requirements than before. MiFID II covers significantly more asset classes than the prevailing directive MiFID I, which is primarily aimed at equities. “In principle, all the main asset classes will be covered in future and clients will have to meet many more requirements,” said Groß. He added that new processes will be necessary, because, among other reasons, data from different databases will have to be submitted. And it must be borne in mind that all participants will have to verify their identity by means of a Legal Entity Identifier (LEI) in future. The manifold reporting obligations constitute the business starting point for Deutsche Börse's regulatory reporting hub. “All players can use our solution, regardless of whether or not they trade on Deutsche Börse's platforms,” stressed Groß. He referred to a “one-stop shop”, where market participants will be able to meet all reporting obligations.
To put it more simply, if in future a French bank trades shares in a Dutch company in the UK, the Eschborn hub – assuming it gets the order – will collect all data, check it for plausibility, enrich it if necessary and generate the reports. “We will prepare data for regulators and the public,” said Groß. In the example given, the data would be delivered to the French supervisory authority, as the bank is domiciled in France and has to report to its national competent authority (NCA).
Pilot phase underway
The hub falls under Regulatory Services, which is part of Deutsche Börse's Market Data segment, and is currently being set up with the involvement of some pilot customers. Groß, former Deutsche Börse Head of Information, Market Data + Services, aims to have the hub ready by summer 2017 to allow sufficient time for testing and connection until 1 January 2018, when MiFID II goes into effect. According to Groß, it will be clearer in this context, who is permitted to offer reporting services.
For this reason, Deutsche Börse wants to register with BaFin as an ARM and an APA and offer services throughout the European Union via EU passporting. ARM, which stands for Approved Reporting Mechanism, is a status required for transaction reporting to regulators such as BaFin. APA stands for Approved Publication Arrangement, a regime via which data relevant to the public is reported. Hub customers, Groß explained, are expected to be market participants with reporting obligations on both sell and buy side, investment companies, systemic internalisers, as well as companies. It is also aimed at trading venues. These can be regulated markets, multilateral trading facilities (MTFs), and organised trading facilities (OTFs), the new platform format created by MiFID II. The hub will also include Regis-TR, the European transaction register co-operated by Deutsche Börse subsidiary Clearstream and Iberclear. Groß stressed that the impact the UK's pending exit from the European Union, or Brexit, will have on that country's NCA, the Financial Conduct Authority (FCA), is not yet clear. “However, it is clear that Deutsche Börse's regulatory reporting hub is a European solution.” This offering also extends to non-EU countries, such as Switzerland, and entities with reporting obligations under its Financial Markets Infrastructure Act (FinfraG). Consequently, the hub could even serve UK customers after Brexit.