In the run-up to MiFID II, Citihub Consulting realised the need for a canonical list of the various data requirements across the regulation. The result was the MiFID II Dictionary, which proved an invaluable resource for Citihub Consulting’s clients and our own consultants as they delivered a variety of MiFID II projects.
Citihub Consulting is increasingly asked by clients to assist on regulatory transaction reporting initiatives and especially those relating to remediation to comply with existing regulation such as EMIR and MiFID II, as well as projects relating to upcoming regulation such as SFTR. During these engagements, it became apparent that reporting terms overlapped and/or had significant similarities across regulations; other terms had nuanced differences which needed explanation.
Stay current on your favourite topics
To address this and provide a holistic view of regulatory reporting, Citihub Consulting has extended the MiFID II Dictionary to incorporate additional terms from EMIR and SFTR, to become the “Regulation Dictionary”. Moving away from the previous piecemeal approach practiced by transaction reporting teams assists with achieving the goal of reducing the volume of reporting rejections to drive towards the goals of “five 9’s” for transaction reporting success.
Alongside the announcement, Citihub Consulting has also published Technical Notes, providing background for the formatting and layout of the source data.
Click here to access the Regulation Dictionary.
For the two regulations, EMIR and SFTR, added to Citihub Consulting’s regulation dictionary, official regulator guidance – references given below – has been released in the form of embedded PDF tables. One table holds a description of the data that the field contains and the second defining the data type of that field.
To take an example from EMIR:
The field, “Country of the other Counterparty” is described as (table1): “The code of the country where the registered office of the other counterparty is located or country of residence in case that the other counterparty is a natural person”. The field contains (table 2) a 2-character country code – ISO 3166. MiFID II contained a third, ‘symbol’, table in which the format of the field’s data type was defined. The use of that ‘symbol’ table has been deprecated in the EMIR and SFTR released RTSs.
Challenges exist in turning lengthy PDF tables into machine-readable format (i.e. comma delimited or Excel format). A recent progression to publishing in Excel format was made in the latest guidance on validation rules for EMIR released on August 9th (https://www.esma.europa.eu/press-news/esma-news/esma-updates-validation-rules-under-emir). Citihub Consulting hopes this will set the direction for future RTS releases, and perhaps even a situation where market participants parse the regulator’s guidance into their internal rules engines (but let’s not run before we can walk!).
To create the regulation dictionary, the two PDF tables were copied into Excel and a VBA macro created to adjust the misaligned output into a tabular form for each. These were then combined, and the source fields added.
The table shows the differences between the formats of the released regulatory guidance. The main development appears to be the increased use of pre-defined 4-character values. Perhaps this development springs from earlier reporting returns where the market participants would have potentially used internal, and therefore differing, definitions for items such as instrument type, valuation methods etc. Without doubt, comparison between trading venues would depend on a constant and shared set of definitions.
References to Regulations:
EMIR Regulatory Technical Standards (RTS): https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R0104&from=EN
EMIR Implementing Technical Standards (ITS): https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R0105&from=EN
SFTR Regulatory Technical Standards (RTS): https://www.esma.europa.eu/sites/default/files/library/esma70-708036281-82_2017_sftr_final_report_and_cba.pdf
Format and Standards table: Pages 234-251
Content to be Reported table: Pages 261 –281
MiFID II Regulatory Technical and Implementing Standards: https://www.esma.europa.eu/sites/default/files/library/2015/11/2015-esma-1464_annex_i_-_draft_rts_and_its_on_mifid_ii_and_mifir.pdf
The consumer of the data dictionary will find it just as easy to use with a single field, giving the source regulation, having been added.