MiFID II reporting rules opening doors for fund administrators

Paul Yau, senior regulatory counsel for Advise Technologies, breaks how fund managers could benefit from using administrators for their MiFID II reporting.

Tightened rules around delegated reporting under MiFID II could pave the way for fund administrators to assist firms in compiling various aspects of their transaction reporting obligations. 

The regulation – coming into force 3 January 2018 – takes reporting responsibility away from the sell-side to the buy-side.

Parties agreeing to a delegated reporting arrangement for transmitted orders must establish transmission agreements.  However, the negotiation of such agreements by firms – likely with multiple brokers – may be a challenging process.  Not all brokers will offer a delegated reporting service to firms and non-EU brokers not subject to MiFID II cannot report on a firm’s behalf.        

The shift away from delegated reporting presents a potential opportunity for fund administrators to play a larger role in assisting firms with various aspects of their transaction reporting obligation. 

Administrators offering regulatory reporting services can work with firms to compile the reportable data and help with preparing the report. 

One particularly valuable benefit that firms can gain from engaging with administrators to support their reporting efforts is the helpful insight that administrators can potentially provide about how its other clients are approaching their reporting. 

Firms want to be in line with their peers in their interpretations of, and compliance with, the new MiFID II requirements, and until industry best practices or regulatory guidance relating to transaction reporting and other areas of the legislation become more established, administrators are able to offer clients a view of how their methodology aligns with the rest of the market. 

With only a matter of months to go until MiFID II comes into effect, much of the industry must soon begin to focus on the final stages of preparation to comply with the far-reaching legislation.  European markets and firms will be the most directly affected by MiFID II, but non-EU firms with an EU presence or investors, that conduct business with EU counterparties, or trade on EU venues, will also be impacted by the legislation’s expansive requirements. 

New rules regarding order transmission will affect firms currently relying on brokers to report on their behalf.  Faced with the challenge to comply with the new MiFID II transaction reporting requirements, firms will seek to engage with their service providers – such as fund administrators, prime brokers, and technology vendors – to support their efforts.

Firms and service providers supporting MiFID II clients must continue to monitor for any transaction reporting updates issued by regulators.  In addition, providers must ensure that their offered services continue to be in compliance with any updated regulatory guidance.  

However, there are good opportunities for providers to build on existing relationships, and to create new ones, as firms look to leverage service offerings from providers to assist with their transaction reporting and other MiFID II requirements. And regardless of whether firms are dealing with MiFID II or any other regulations, the quality of the delivered services will be key to a lasting relationship.