MiFID II - Bloomberg Professional Services · MiFID II BACKGROUND WHAT IS MiFID II? In 2007 the...

MiFID IIWhat to Expect and How to Prepare

MiFID II BACKGROUNDWHAT IS MiFID II?

In 2007 the Markets in Financial Instruments Directive

(MiFID) came into force focusing on the operation of

European equity markets.

Its objective was to increase integration and efficiency of

markets through the establishment of a harmonised

regulatory framework across the European Union (EU).

In 2010 the European Commission (EC) started a process to

review and update MiFID seeking to increase market stability

and confidence whilst also bolstering consumer protections.

WHAT ARE THE KEY OBJECTIVES?

The key objectives of the updated directive (MiFID II) and the

accompanying regulation (MiFIR) are:

• To ensure the fair, effective and safe operation of

financial markets.

• To address shortcomings in the initial MiFID framework.

• To expand the scope of MiFID into non-equity products.

• To enforce conduct of business rules for financial

service intermediaries.

• To form part Europe’s post-crisis response to the 2009

G20 commitment to reform markets.

WHO IS AFFECTED?

The updated directive applies to a broader range of financial industry players

providing investment services including:

• Investment Banks

• Portfolio Managers

• Brokers

• Market Makers 2

CURRENT REGULATORY TIMELINE

20182017

DEC 2014

Draft guidelines

published

28 DEC 15

Deadline for EC to endorse RTS

28 SEP 15

ESMA publishes final draft RTS

JAN 2016

Expected

ESMA final draft

Delegated Acts

CURRENT IMPLEMENTATION

PERIOD

EXPECTED IMPLEMENTATION

EXTENSION

17 JUL 16

NCAs to

transpose into

national law

3 JAN 17

Current deadline

for MiFID II

compliance

JAN 2018

Expected extended

deadline for MiFID II

compliance

201620152014

The Level 1 legislation set an enforcement deadline for

MiFID II and MiFIR of 3rd January 2017.

In September 2015, ESMA presented the final draft

Regulatory Technical Standards (RTS) and Implementing

Technical Standards (ITS) to the EC for ratification within 3

months.

The final Delegated Acts under the Directive are still

outstanding and are widely expected to be published in early

2016.

In November 2015, ESMA and the EC proposed that the

deadline for MiFID II should be delayed by one year to

allow for:

• Clarification of the final rules from ESMA and the National

Competent Authorities (NCAs), and

• Increased time for the implementation of technological

solutions by the industry.

Bloomberg anticipates an amendment to Level 1 text will

be required to formalise the new timeline.

3

CHALLENGES TO MiFID II COMPLIANCE

MiFID II

Data &

Analytics

Best

Execution

Post-Trade

Transparency

Derivatives

Clearing &

Repository

Transaction

Reporting

Trading

Venues

Technology

Research

Trade

Reconstruction

Record

Keeping

Pre-Trade

Transparency

Surveillance

4

EXECUTION/TRADING WORKFLOW

POST-TRADE OPERATIONS

PRE-TRADE WORKFLOW

MiFID II AFFECTS MOST PHASESOF THE TRADING LIFECYCLE

RECORD

KEEPING

&

SURVEILLANCE

Research &Idea Generation

Pre-TradeAnalytics

OrderManagement

PriceDiscovery

Pre-TradeTransparency

Routing & Execution

Post-Trade Transparency

Settlement & Clearing*

TransactionReporting

BestExecution

Trade Reconstruction

Trade Allocations& Confirmation*

REFERENCE

&

MARKET DATA

* MiFID II does not formally address these segments of the trading lifecycle5

EXECUTION/TRADING WORKFLOW


PRE-TRADE WORKFLOW

BLOOMBERG IS BUILDING PRODUCT SOLUTIONS ACROSS THE TRADING LIFECYCLE


Pre-TradeAnalytics

OrderManagement

PriceDiscovery


Routing & Execution


Settlement & Clearing


BestExecution


Trade Allocations& Confirmation

- Research tools - Data and analytics incorporating output from

Regulated Markets and APAs- Order capture systems

- Technology

- Pre-Trade

Transparency (APA)

- Post-Trade

Transparency (APA)

- Trading Venues

(MTF)

- Transaction

Reporting (ARM)

- Best Execution

(BTCA)

- Trade Reconstruction

(BVAULT)

- EMIR

- EMIR

REFERENCE

&

MARKET DATA

RECORD

KEEPING

&

SURVEILLANCE

(BVAULT)

6

PRE-TRADE WORKFLOW

QUESTIONS YOU SHOULD

BE ASKING

- How will you aggregate

pre-trade and post-trade

data from other venues?

- How will you capture non-

electronic quotes and

trading?

- How will you determine

whether to act as agent or

principal?

- How will you get the

research you need?

- How will you budget and

pay for it?

- How will you publish your

own research?

- Do you have a process to

analyse consumers of your

research?

- Do you have a process

and systems to evaluate

research?

- Part of Delegated Acts

expected to be published

early 2016

- Potential unbundling of

research from trading

commissions

- Research budgeting,

evaluation, payment

mechanisms and

reporting obligations


Order Management

Pre-TradeAnalytics

PriceDiscovery

- New order origination and

transmission requirements

including “decision maker”

identification detail

captured for record

keeping

- UTC clock synchronisation

- Time stamp granularity

- Voice communication

tagging and storage

- Real-time market data to be provided to public on

“reasonable commercial basis”

- Pre-trade liquidity characteristic and trade venue

assessment and selection diligence for order routing

and execution

- Incorporation of historical best execution metrics and

diligence requirements

- Research evaluation tools

- Commission Management

Service (BCMS)

• Research management:

Budgeting, approvals and

payments

• Increased coverage of

independent research

providers

- Historical trade cost analysis

for improved decision support

and execution strategy

- Bloomberg Multilateral Trade

Facility (MTF) integrating pre-

trade market data in core

terminal functionality

- Consolidated data

aggregating quotes and

pricing from all venues: RMs,

OTFs, APAs, SIs, and CTPs

- Real-time, standardised

analytics for

benchmarks and model

selection integrated with

the Bloomberg terminal

HOW BLOOMBERG CAN HELP

- Clock Synchronisation

- Voice and

communication capture,

storage and tagging

(BVAULT)

7

EXECUTION & TRADING WORKFLOW



BE ASKING

- How will you make your

actions transparent to the

market: RM, Trading

Platform, APA?


whether instruments are

categorised as liquid?

- How confident are you in

determining and

calculating your SI status?


size-based (LIS, SSTI)

waivers for reporting?

- Trades in covered instruments reported by trading

venue or through APA

- Delayed post-trade data available

to all without charge

- Derivatives reported to Trade Repository (TR) T+1;

greater data requirements than APA for systemic risk

- SI Calculation Analytics - Bloomberg MTF - Reporting Waiver Determination

engine

- Bloomberg APA


Routing & Execution


Trade Allocations& Confirmation

- Investment firms and designated Systematic Internalisers

(SI) mandated to report “Actionable Indications of Interest”

to the market via “Approved Publication Arrangements”

(APA)

- Must capture non-electronic orders and quotes

- Reporting waiver determinations based on security liquidity

categorisation and trade size (LIS, SSTI)

- Routing to established Trading Venues: Regulated Markets

(RM), Multilateral Trade Facilities (MTF), Organised Trade

Facilities (OTF), SIs

- Current order book, multi-RFQ and voice trading protocols

to be reviewed, pending changes post implementation

- Monitor and manage execution quality and performance

(best execution)

8


QUESTIONS YOU SHOULD BE ASKING

- How many systems do you have that hold reportable trades or transactions?

- Where will you store the “decision maker’s” personal data?

- Do you have scalable systems to report transactions to the appropriate NCA?

- Do you have systems to demonstrate and report best execution practices?

- Does your transaction reporting (ARM) solution flow into an integrated best execution, surveillance, trade reconstruction and data retention solution for all your MiFID II post-trade regulatory compliance and market abuse obligations?


- Trades in all covered

instruments reported to

National Competent

Authority (NCA), the local

regulators, with LEIs,

other identifying personal

data and economic terms

- Direct reporting through

ARM or venue

- Firms must prove

completeness with

controls and procedures

for errors and corrections

- Expanded requirements to

demonstrate “sufficient”

steps to provide best

execution

- Publish execution policy

- Demonstrate performance

against that policy

- SIs and other trading

venues required to publish

reports on quality of

execution

- Applicable to all MiFID II

instruments accounting

for size, price, cost, speed,

likelihood of execution

and settlement

- Market abuse

surveillance by

identifying suspicious

execution outliers

and trends

- Investigate with trade

reconstruction

incorporating structured

and unstructured data

- Compliance workflow

for documenting

conclusions

- Immutable Write Once,

Read Many (WORM)

record keeping

- Extension of Trading

Solution’s multi-asset MiFID

ARM to meet MiFID II

requirements

- Multi-asset Bloomberg

Transaction Cost Analytics

(BTCA) product for trade

and trend outlier

identification

Settlement & Clearing


BestExecution


- EMIR Requirements

- BVAULT:

comprehensive and

compliant data storage

and reconstruction of

structured and

unstructured data- Integration with a complete

post-trade regulatory

compliance workflow9

REFERENCE & MARKET DATA

QUESTIONS YOU SHOULD BE ASKING

- From where will you retrieve and how will you store instrument liquidity categorisation?

- From where will you retrieve and how will you store market size for SI determination?

- From where will you retrieve and how will you store market size for LIS and SSTI?

- Do you have the necessary identifiers for your financial instruments?

- Do your systems have the capacity to deal with the increase in the amount of data and velocity of quotes?

HOW CAN BLOOMBERG HELP

MiFID II – DATA REQUIREMENTS FOR TRANSPARENCY

- Instrument identification using official and internal unique instrument and product identifiers

- Instrument by Instrument Approach (IBIA) and Classification of Instrument Approach (COFIA) liquidity status

of securities and derivative

- Pre- and post-trade transparency Large in Scale (LIS) and Size Specific To Instrument (SSTI) determinations

- Consolidated market data for use as the denominator in determination of Systematic Internaliser (SI) status

- Financial Instrument Global Identifier (FIGI) offers truly unique identifiers which can be mapped to official ISIN codes

- Bloomberg Back Office reference data products capture and maintenance of official security, complexity and liquidity

categorisation and market data

- Additional analytics on static and market data

10

RECORD KEEPING & SURVEILLANCE


BE ASKING

- Do you have immutable

Write Once Read Many

(WORM) storage?

- To what will you

synchronise your clocks?

- How granular is your

timestamping capability?

- How will you manage your

timestamping of records?

- Do you have systems to

investigate market abuse

scenarios?

- How quickly and efficiently

can you retrieve and

reconstruct events relating

to a particular trade event?

- BVAULT captures, archives and maintains all communications, trade, voice and file record keeping

- BVAULT algorithmic surveillance, monitoring and detection for communications and files

- BVAULT integration with BTCA best execution product

RECORD KEEPING

- Immutable records of all services, activities and transactions for 5-7 years without modification or deletion in Write Once Read Many (WORM) storage

- Synchronisation of clocks to Consolidated Universal Time (UTC) to enable timestamping at granularity of up to 100 microseconds

- Requirement covers all media including: email, social media, instant messaging, telephone, written documents

TRADE RECONSTRUCTION

- Trade lifecycle transparency requirements

- Must be “readily available” upon request

- Similar to requirements under US Dodd-Frank Act

SURVEILLANCE

- Increased monitoring of marketing and distribution activities for restricted instruments

- Trade and communication surveillance integration requirements

HOW CAN BLOOMBERG HELP

11

MiFID IIHow Bloomberg Can Help


Liquidity:

Instruments are subjected to differing transparency regimes depending upon their assessment of liquidity.

The less liquid the instrument is deemed to be, the less transparency it is subjected to. Illiquid bonds are not

subject to pre-trade reporting and all post-trade reporting is deferred.

Liquidity assessments for bonds and derivatives are performed using different taxonomies.

Bloomberg will collate, calculate and maintain the data used in transparency

determination

Taxonomy Stand For In Practice Applies To

COFIA Classification of Instrument

Approach

Instruments are classified into

homogenous categories i.e. Sovereign

Bond

Derivatives (and

newly issued Bonds)

IBIA Instrument By Instrument

Approach

Instruments are classified individually by

ISIN

Bonds

13


Liquidity:

A bond is considered to be illiquid at issuance subject to the

following issuance size:

Thereafter bonds are assessed quarterly and re-categorised

as liquid if they meet all of the following criteria:


determination

Bond Type Issuance Size Less Than

Sovereign Bond EUR 1bn

Other Public Bond EUR 500mm

Convertible Bond EUR 500mm

Covered Bond EUR 500mm

Corporate Bond EUR 500mm

Quantitative Variable Value

(MIN)

Average Daily Notional Amount EUR 100k

Average Daily Number of Trades 2

Traded on available days 80%

14


Trade Size:

MiFID II introduces new calibration levels in relation

to order or trade size:

Size Specific to the Instrument (SSTI)

Large in Scale (LIS)

The relationship between

liquidity and trade size can be tabulated:

Note that the application of all waivers and deferrals are at the discretion of each individual National Competent Authority


determination Corporate Asset class – Bonds (except ETCs and ETNs)

Bond Type

Percentiles to be applied

SSTI pre-trade LIS pre-trade SSTI post-trade LIS post-trade

Trade -

percentile

Trade -

percentile

Trade -

percentile

Trade -

percentile

Sovereign 60 70 80 90

Other Public 60 70 80 90

Convertible 60 70 80 90

Covered 40 70 80 90

Corporate 60 70 80 90

Other 60 70 80 90

Obligation Level 1

Illiquid

Level 2

Liquid < SSTI

Level 3

Liquid > SSTI < LIS

Level 4

Liquid >

LIS

Pre-Trade Nil Real Time Nil (composite for

venue)

Nil

Post-Trade T+2* Real Time T+2* T+2*

15


Consolidated Market Size:

MiFIR defines Systematic Internalisers as:

“investment firms which, on an organised, frequent, systematic and substantial basis, deal on their own account by

executing client orders outside a trading venue”

Systematic Internaliser status is measured by the same taxonomy as liquidity, i.e. IBIA for bonds and COFIA for derivatives

Bloomberg will capture the official consolidated market size that is used as the denominator in the SI determination

calculation for every instrument

Bloomberg can capture a potential SI’s market activity to be used as the numerator in the same SI determination calculation

In addition Bloomberg will capture the output of significant Regulated Markets, trading platforms, APAs and potentially the

proprietary output of SIs to create consolidated composite market data


determination

16

APA - TRANSPARENCY

MiFID II requires market participants to provide pre- and post-trade transparency

for bonds and derivatives

Market Participants in Scope:

Permitted Methods to Meet Transparency Obligations:

Scope Investment

Firm (IF)

Systematic

Internaliser (SI)

Venue:

Multilateral

Trading Facility

(MTF)

Venue:

Organised

Trading Facility

(OTF)

Venue:

Regulated

Market (RM)

Pre-Trade No Yes Yes Yes Yes

Post-Trade Yes Yes Yes Yes Yes

Obligation IF SI Venue: MTF Venue: OTF Venue: RM

Pre-Trade N/A APA,

proprietary

APA,

proprietary

APA,

proprietary

APA,

proprietary

Post-Trade APA APA APA,

proprietary

APA,

proprietary

APA,

proprietary17

APA - TRANSPARENCY

Summary Reporting Requirements:

Key Publication Requirements:

• Machine readable data designed to be directly and automatically read by a computer

• Can be accessed, read, used and copied by software that is free of charge and publically available

• Supplied on a reasonable commercial basis

• Non-discriminatory access

• Published real time unless subject to a waiver or deferral

MiFID II requires market participants to provide pre- and post-trade transparency

for bonds and derivatives

Obligation Level 1

Illiquid

Level 2

Liquid < SSTI

Level 3

Liquid > SSTI < LIS

Level 4

Liquid > LIS

Pre-Trade Nil Real Time Nil

(composite for venue)

Nil

Post-Trade T+2* Real Time T+2* T+2*

18

CORE FUNCTIONS

Bloomberg’s APA will provide core functionality

to allow clients to connect and send pre- and

post-trade quote information from proprietary

systems

Asset Classes supported:

– Bonds

– Derivatives (IR/Credit/FX/Commodity/Equity)

– Structured Finance

Solutions available for investment firms and

trading venues

Identification of reporting responsibility to avoid

duplicate reporting

Data will be made public via the Terminal and

through external channels

ADVANCED FUNCTIONS

Bloomberg will offer advanced functions to

address challenges customers face indirectly

related to pre- and post-trade transparency

obligations

SI Determination Calculator

Tools to assist clients in determining and

managing their SI status across a range of

instruments

Waivers & Deferrals Engine

Services to calculate the determination of which

pre- and post-trade information need to be made

public

Voice / Instant messaging

Solutions to help clients manage their pre- and

post-trade reporting obligations when interacting

with counterparties via voice/message channels

RELATED FUNCTIONS

Bloomberg will offer related solutions to improve

informational awareness of the terminal user

base

Static Data Enrichment

Detailed information per instrument displaying

liquidity status, size thresholds and other related

data

Consolidated Data

A consolidated tape of real time data based on

multiple public data sources from APAs and

trading venues

Reporting Hub

A centralised reporting hub on the terminal to

help clients manage their reporting requirements

APA - TRANSPARENCY

Bloomberg LP will request authorisation from the UK FCA to operate an APA

19

MTF - ROUTING & EXECUTION

MiFID II defines Trading Venues

• MTFs exist under MiFID

• OTFs are a new entity introduced by MiFID II

• OTFs are distinguished from MTFs in that the OTF trading process may involve the use of discretionary rules

by the operator

• OTFs and MTFs must provide information to their NCA regarding rules, procedures, surveillance procedures

and membership

VENUE FULL NAME EXAMPLE

MTF Multilateral Trading Facility Trading platforms e.g. Bloomberg

OTF Organised Trading Facility Voice Brokers e.g. ICAP

RM Regulated Market Exchange e.g. EUREX

20


Regulation, Background and Impact

21

WHAT IS KNOWN

1. Certain IRS and CDS instruments will have to be traded

exclusively on regulated Trading Venues (MTF/OTF/RM)

2. Multilateral Systems must be regulated as Trading Venues hence

any instrument that is traded on a multilateral basis must be

executed on a Trading Venue

3. Derivatives executed on a Trading Venue are subject to:

• Pre-trade credit checks

• Tight timelines for clearing

WHAT ARE WE STILL WAITING FOR

The ‘Trading Obligation Procedure’. This is due to be released before

June 2016 and will list:

• The specific instruments that are required to be executed on

Trading Venues

• Treatment for trades that are Large in Scale and Package

Transactions

UNIVERSE OF PRODUCTS THAT MAY BE COVERED

ESMA will determine the products that must be executed on a Trading Venue

using the following criteria:

1. The product must be subject to the EMIR Clearing Mandate (see table)

2. It must be sufficiently liquid

3. It must be admitted to trading on at least one Trading Venue

PRODUCTS SUBJECT TO THE EMIR CLEARING MANDATE¹

¹Commission Delegated Regulation (EU) 2015/2205

²JPY has max 30Y

TYPE CCY MATURITY NOTIONAL

BASIS EUR, GBP, USD, JPY 28D-50Y2 Constant and Variable

FIX-FLO EUR, GBP, USD, JPY 28D-50Y2 Constant and Variable

FRA EU, GBP, USD 3D-3Y Constant and Variable

OIS EUR, GBP, USD 7D-3Y Constant and Variable


Bloomberg MTF offers best-in-class execution for IRS and CDS1

22

TRADING

• Multi-dealer RFQ

• Deep liquidity

• All major dealers

CLEARING

• Direct connectivity to key clearing houses

• LCH, CME, ICE, EUREX

• Connectivity to Middleware

REPORTING

• EMIR reporting solutions available

• BMTF reports to Bloomberg’s APA

¹Bloomberg MTF is in the process of seeking approval to offer FI cash bonds, FX derivatives, commodity derivatives and equity derivatives

BBTI<GO>

ARM - TRANSACTION REPORTING

Engine determines:

• Trade reporting eligibility

• What to report

• Where to report

• When to report

Trade enriched with

Bloomberg data and

OMS static data

Trades/transactions

are batched to report

during the appropriate

reporting window

Bloomberg Trading Solutions offers a multi-asset regulatory reporting platform

that was built to satisfy sell-side trade and transaction reporting obligations

Trade

Data

Enrichment

Reporting

Rules

Engine

Report

Release

Scheduler

T+3 Mins

T+15 Mins

T+1 Day

23


FCA(MiFID I ARM)

IIROCLSE SWISS TRACE MSRB

Multi-asset solution based-off Bloomberg market sector “yellow keys”:

• GOVT

• CORP (including CDS)

• MTGE

• MUNI

• PFD

• EQTY

• CMDTY (ISIN identified futures)

T+15 min

T+45 min

T+3 min T+3 min T+15 min T+1 Day T+1 Day

The platform was built to satisfy multiple sell side reporting obligations

One trade or transaction may be sent to multiple destinations or regulators

24


• Individual trades are held and aggregated into a batch file to be sent to the FCA via Trading Solution’s ARM

• The ARM has 4 time slots to release scheduled batch files providing clients with many opportunities to amend and to resend.

• STATUS:

Queued: Trades are being held in the RGTY<GO> blotter

Pending: Trades transmitted but awaiting FCA response

Accepted or Rejected: Response received from FCA and reflected in the RGTY<GO> blotter

• Other RGTY<GO> Blotter Statuses

• Trading books and asset classes may be excluded from the reporting processes. Trades in such books and assets

will not appear in the RGTY<GO> blotter

• Trades for which the asset class is enabled but for which there is no exchange, appear in the RGTY<GO> blotter with a

status of “Not Requested”. You can manually report these trades

• Trades which do not have an ISIN, or the ISIN cannot be validated, appear in the RGTY<GO> blotter with a status of

“Rejected”. If you know the ISIN, you can manually amend enabling the trade/transaction to be resubmitted

Bloomberg is a Approved Reporting Mechanism (ARM) under MiFID,

reporting to the UK FCA

25


CustomisationTrade Transaction Blotter

Summary

Identify issues in real-time

Amend reports and resubmit

Customise the view

Setup reporting control

RGTY<GO>

The platform creates a post-trade Compliance and Operations workflow

Establish trade reporting obligations by activity/trader

26

BTCA - BEST EXECUTION

MiFID II Best Execution rules are more prescriptive than MiFID

An execution policy must be written to explain clearly, in sufficient detail and in a way that can be easily

understood by clients how orders will be executed by the firm for the client. Should include information

on different venues where investment firm executes its client orders and the factors affecting the choice

of execution venue.

Member States shall require that Investment Firms take all sufficient steps to obtain, when executing

orders, the best possible result for their clients taking into account price, costs, speed, likelihood of

execution and settlement, size, nature or any other consideration relevant to the execution of the order.

Investment Firms are required to publish, on an annual basis, information of the identity of top 5

execution venues or brokers and on the quality of execution against their stated policy.

27


Information required be published to retail and professional clients

Per client type and class of financial instrument:

• Venue name and identifier (MIC)

• Volume of client orders executed on each venue as a percentage of total executed volume

• Number of client orders executed on each venue as a percentage of total executed orders

• Percentage of order that were passive and aggressive

• Percentage of orders that were directed to a specific venue by the client prior to execution of

the order

• Notification of whether it has executed an average of <1 trade per business day in the previous

year in a class of financial instrument

28


Information required be published on the quality of execution

An annual publication of a summary of the analysis and conclusions drawn from all clients orders from

the previous year

• Explanation of the relative importance the firm gave to the execution factors of size, price, cost,

speed, likelihood of execution or any other consideration including qualitative factors when

making assessments of the quality of execution

• Description of any close links, conflicts of interest and common ownership with respect to any

execution venues used to execute orders

• Description of any specific arrangement with any execution venues regarding payments made

or received, discounts, rebates or non-monetary benefits received

• Explanation of the factors that led to a change in the list of execution venues listed in the firm’s

execution policy, if such a change occurred

29


Information required be published on the quality of execution

An annual publication of a summary of the analysis and conclusions drawn from all clients orders from

the previous year

• How order execution differs according to client categorisation, where the firm treats such

category of client differently and where it may affect the order execution arrangements

• When other criteria were given precedence over immediate price and cost when executing

retail client orders and how these other criteria were instrumental in delivering the best possible

result in terms of the total consideration to the client

• How the investment firm has used any data or tools relating to the quality of execution

• How the investment firm has used, if applicable, output of consolidated tape which will allow for

enhanced measures of execution quality or any other algorithms used to optimise and assess

execution performance

30


Publication using pre-defined ESMA provided set of templates

• Machine readable electronic format

• Available for downloading by the public

31


MiFID II extends the range of covered financial instruments

• Equities:

– ADT < 100,000

– 100,000 ADT < ADT < 50m

– ADT > 50m

• Bonds:

– Corporate Bond & Covered Bonds

– Sovereign Bond

– Convertible Bonds

• Structured Finance Products:

– MBS

– ABS

• Emission Allowances

• Securitised Derivatives: (including equity rights)

– Covered Warrants

– Certificates Derivatives

– Negotiated Rights

– Structures MTNs

– Others

• Credit derivatives:

– Credit Default Swaps

• Other derivatives:

– Environmental

– Freight

– Exotic

• Contracts for Difference

• Exchange Traded Funds

• Money Market Instruments

– Treasury Bills

– Certificates of Deposits

– Commercial Paper

– Others

• Certificates

• Interest Rate Derivatives: – Futures & Options

– Interest Rate Swaps

– Forward Rate Agreements

– Others

• Foreign Exchanges Derivatives: – Futures & Options

– Forwards & FX Swaps

– Others

• Equity Derivatives: – Futures & Options

– Swaps & Forwards

– Portfolio swaps

– Others

• Commodity derivatives:– Precious Metals

– Non-Precious Metals

– Energy

– Index

– Agricultural

32


Bloomberg Transaction Cost Analysis helps you meet MiFID II requirements

• Fully integrated with market data and other analytical tools to equip your for execution analysis

• Tools to generate the reports required by ESMA

• Allows for daily monitoring of execution outliers to help to identify and rectify execution policy

before they show up in the annual reports

33


Pre-route decision support tools provide

insight on optimal aggression levels, timing

and strategy to employ for the order in hand.

These tools are calibrated and nourished by

previous trading results:

Pre-route

TCA / PEX / LQA / TP

Monitor execution progress ‘in-flight’ and adjust strategy to optimize based

on market drivers like news and events and real time market data

EMSX / TSOX

Set context relevant

rules to

automatically

identify Best

Execution

exceptions and

route them

efficiently for

investigation

Investigate exceptions by single click

access to forensic level news, data and

unstructured content then determine

and record decisions

Deliver the insights gained in post-trade

analysis to pre-route tools for

incorporation into the decision support

matrix

Analyse

Decide

Act

34

Bloomberg Transaction Cost Analysis “BTCA” is a fully customizable, pre- and

post-trade transaction-cost-analysis tool that

allows you to create, schedule, and distribute

custom reports.

Quickly identifies outliers and quantifies the

value added to the investment process using

dozens of benchmarks for comparison.

Displays relevant charts, news, and market

data, to perform detailed trade analysis and

break down costs across the full order

lifecycle.

New study finds Bloomberg

as Top Fixed-Income TCA

Provider– Greenwich Associates, April 29, 2015

TCA Report View

TCA Exception Dashboard


35

BVAULT - RECORD KEEPING & TRADE RECONSTRUCTION

MiFID II requires firms to keep records in order to reconstruct trades with

a view to allowing effective surveillance of market conduct

Record Keeping • Records shall be kept of all services, activities and transactions undertaken by investment

firms to support enforcement actions under MiFID, MiFIR and MAD/MAR

• Records include all emails, IM, recording of telephone conversations, transactions and

documents (even if it doesn’t lead to a transaction)

• Records will be kept for a minimum of 5 years (up to 7 years where a regulator specifies)

in a manner so that they cannot be modified or deleted’ (compliance storage)

Trade Reconstruction • Firms are required to provide transparency into trade life cycle – they must have trades

and communications (incl. voice) ‘readily available’ and provided upon client’s and

regulator’s request

Surveillance • Firms must strengthen conduct of business rules

• Firms are required to increase monitoring and surveillance on marketing and distribution

activities for prohibited or restricted financial instruments

• The technical guidelines from ESMA require firms to integrate surveillance platforms for

trades and communications to increase market transparency

36


BVAULT is a Bloomberg hosted governance and analytics solution

File Analytics• Gain visibility into unstructured data

repositories to identify sensitive data

• Globally search, manage, retain and

analyse data instantly

Trade Reconstruction• Instantly search and associate

communication data to transactions for

export

• Compliment internal trade

compliance/surveillance practices

Surveillance• Real-time Policy Management

• Dramatically reduce false positives

eDiscovery• Advanced search, analytics and review

• Improves Performance & Efficiency

BLOOMBERG VAULT CORE OFFERING

Enterprise Archiving• WORM Storage

• Letters of Attestation

• 100% Guaranteed Reconciliation

………………………………………………………………………….

………………………………………………………………………….

37


BVAULT is a Bloomberg hosted governance and analytics solution

38


BVAULT supports a wide range of media

Bloomberg Data

• Message (MSG)

• Instant Bloomberg (IB)

• Bloomberg

• Trade Data

Social Media

• Facebook

• Twitter

• LinkedIn

• Salesforce Chatter

• Yammer

• YouTube search

• Google chat

Instant Messaging

• AOL IM

• Microsoft Lync

• Blackberry

• Reuters

• Yahoo Messenger

• Jabber

Corporate Email

• Microsoft® Exchange

• Microsoft Office 365

• Lotus Domino

Voice Data

• BFON

• Voice Recording, Including

Nice, Redbox, Verint

• Call Detail Records

• Mobile Recording

Trade Data

• Bloomberg Trading Systems

• FPML exports from:

Aladdine, Murex, Calypso,

etc

File Analytics

• Unix & Windows file shares

• SharePoint 2010 & 2013

• BOX39

Reconstruct communications identified with trades as part of

regular trade audit workflows

Structured trade data and unstructured communication

search

Counterparty directory management and search by LEI

(Legal Entity Identifier)

Manage responses to regulatory authorities

• Respond to Regulatory Requests

MiFID II

CFTC

HKMA, MAS, etc

• Improve Trade Audit Processes

Reconstruct communications associated

with trades as part of regular trade audit

workflows

• Compliment Trade Surveillance

Investigate alerts and events generated

from the trade surveillance platform


BVAULT offers trade reconstruction capability

40

Content relevancy optimises compliance review by reducing false positives

Algorithmic compliance policy framework:

Intelligent approach by applying context aware algorithmic

policies in real-time.

40+ score based policies

Apply policies by group with varying violation thresholds

Massive reduction of false positives and lower

Full-Time-Equivalent (FTE)

Improved violation results with built-in multi-language

support


BVAULT utilises algorithmic compliance policy monitoring

41

Market Abuse

……………………………………………

• Fair and Balanced

Communication

• Front-running

• Inside / Non-Public Information

Conduct Risk

……………………………………………

• Customer Complaints

• Gifts & Entertainment

• Harassing or Offensive

Communication

Data Loss Prevention

……………………………………………

• Social Security

• Credit Card Number

Conflict of Interest

……………………………………………

• Restricted Lists

• Customer Lists

• Deal List / Watch List

THE LONG ARM OF MiFID II: THIRD COUNTRY THOUGHTS

Q: What will the EU entity expect of me for them to be able to comply with the MiFID II regulation?

Relationship to the

EU Entity:

MiFID II Obligations

Research / CSAs Pre-

Trade

Transp

arency

Post-

Trade

Trade

Report

Transaction reporting Best Execution Trade Reconstruction &

Trade Surveillance

I am a:

Off-shore managing

EU money

Example: EU€ money

→ US manager

EU manager most likely will

require off-shore manager to

conform to “use of dealing

commission directives.”

However, if the EU participant

contracts off-shore on a total

return structure, research

costs could be blurred.

EU manager will probably require off-shore

manager to show that they have:

1) Received from their executing brokers

and order execution policy;

2) Their executing brokers can demonstrate

that they are taking “sufficient steps” for best

execution. This may include supplying best

execution reports to show that they are

executing in their clients best interests.

I am a:

Off-shore executing

orders for a local

(only) instrument for

an EU decision maker

EU manager will have to

confirm to “use of dealing

commission” directives.

Although there is no formal reporting

obligation, EU manager will probably

pressure local broker to return electronic

trade reports in a format compatible with

manager’s new transaction reporting

systems.


broker to:

1) Have an order execution policy;

2) Demonstrate “sufficient steps” were taken

for best execution. This may include

supplying best execution reports to show

that they are executing in their clients best

interests.

I am a:

Off-shore executing

orders for DUAL

LISTED instrument for

an EU decision maker

Example: EU order →

US execution

EU manager will have to

confirm to “use of dealing

commission” directives.

EU counterparty will probably require a LEI

from their off-shore executing broker for their

transaction reporting obligation.

EU manager likely to pressure local broker to

return electronic trade reports in a format

compatible with manager’s new transaction

reporting systems.


broker to:

1) Have an order execution policy;

2) Demonstrate “sufficient steps” were taken

for best execution. This may include

supplying best execution reports to show

that they are executing in their clients best

interests.

EU counterparty will

probably require an audit

trail for market abuse/trade

surveillance reporting

obligation.

Key: =Obligation will apply directly =Obligation will apply indirectly

THE LONG ARM OF MiFID II: THIRD COUNTRY THOUGHTS

Q: What will the EU entity expect of me for them to be able to comply with the MiFID II regulation?

Relationship to the

EU Entity:

MiFID II Obligations

Research / CSAs Pre-Trade

Transparency

Post-Trade

Trade Report

Transaction reporting Best Execution Trade Reconstruction &

Trade Surveillance

I am a:

Off-shore giving

money to an EU

investment company

to manage

Example: US$ money

→ EU manager

Off-shore entity will have to

approve manager’s research

budget.

I am a:

Off-shore giving

orders to an EU broker

to execute

Example: US$ orders

→ EU execution

EU broker will be unable to

“create” soft dollars because

they have to confirm to “use

of dealing commission”

directives.

EU broker will probably require a LEI

form their off-shore counterparty for

their transaction reporting obligation.

EU broker will perform

market abuse/trade

surveillance on their off-

shore counterparties

orders and executions.

I am a:

Branch executing off-

hours in EU-listed

instruments in the

name of my EU

investment company.

Since the branch is acting in

the name of the EU entity,

they have the same

responsibilities as if they were

the EU entity.

Branch will have

the same

responsibilities

as the EU entity.

Branch will have

the same

responsibilities

as the EU

entity.

Branch will have the same

responsibilities as the EU entity.




responsibilities as the EU

entity.

I am a:

Branch executing off-

hours in DUAL listed

instruments in the

name of my EU

investment company

Since the branch is acting in

the name of the EU entity,

they have the same

responsibilities as if they were

the EU entity.

Branch will have

the same

responsibilities

as the EU entity.

Branch will have

the same

responsibilities

as the EU

entity.






responsibilities as the EU

entity.

Key: =Obligation will apply directly =Obligation will apply indirectly

DISCLAIMER

44

The BLOOMBERG PROFESSIONAL® service and BLOOMBERG Data (the “Services”) are owned and distributed by Bloomberg Finance

L.P. (“BFLP”) in all jurisdictions other than Argentina, Bermuda, China, India, Japan, and Korea (the “BLP Countries”). BFLP is a wholly

owned subsidiary of Bloomberg L.P. (“BLP”). BLP provides BFLP with global marketing and operational support and service for the Services

and distributes the Services either directly or through a non-BFLP subsidiary in the BLP Countries. Certain functionalities distributed via the

Services are available only to sophisticated institutional investors and only where the necessary legal clearance has been obtained. BFLP,

BLP and their affiliates do not guarantee the accuracy of prices or information in the Services. Nothing in the Services shall constitute or be

construed as an offering of financial instruments by BFLP, BLP or their affiliates, or as investment advice or recommendations by BFLP, BLP

or their affiliates of “an investment strategy or whether or not to “buy”, “sell” or “hold” an investment. Information available via the Services

should not be considered as information sufficient upon which to base an investment decision. BLOOMBERG, BLOOMBERG

PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK,

BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS and BLOOMBERG.COM are trademarks and service marks of

BFLP, a Delaware limited partnership, or its subsidiaries.

THANK YOU

MiFID II - Bloomberg Professional Services · MiFID II BACKGROUND WHAT IS MiFID II? In 2007 the...

Documents

Transcript of MiFID II - Bloomberg Professional Services · MiFID II BACKGROUND WHAT IS MiFID II? In 2007 the...