In a statement providing market participants with an update on the Financial Conduct Authority’s (FCA) latest expectations for firms ahead of 31 October, the regulator outlined steps firms should be taking to prepare for Brexit and a possible no-deal exit.

“During this time firms should take reasonable steps to be prepared to comply with post-exit MiFID transaction reporting and EMIR trade reporting requirements. The FCA will take a proportionate and pragmatic approach to supervising reporting around exit day,” the FCA said.

On MiFID transaction reporting, the FCA added that firms unable to fully comply with the requirements at the time of Brexit will have to back-report missing, incomplete or inaccurate transactions.

For EMIR trade reporting, trade repositories registered with the FCA must be ready to receive reports and share with UK authorities, and companies reporting under EMIR should ensure reports of derivatives transactions concluded, terminated and/or modified on 30 and 31 October which can’t be reported prior to that date are reported to an FCA-registered trade repository no later than 4 November.

“The FCA has been preparing to ensure UK financial services are well placed if the UK leaves without a deal. Today, we have set out steps certain firms need to take – it is important that firms are as prepared as possible if there is a no-deal exit, and that they are aware of what they need to do,” Nausicaa Delfas, executive director for International at the FCA, commented.

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The Financial Conduct Authority (FCA) said in a statement that Goldman Sachs had failed to provide accurate reporting for 220.2 million transaction reports, as required under the rules, during the period between November 2007 and March 2017.

According to the regulator, Goldman Sachs submitted inaccurate, incomplete or untimely reports for around 213 million reportable transactions, and breached the FCA’s rules by providing reports for around 6.6 million transactions which were, in fact, not reportable.

“The failings in this case demonstrate a failure over an extended period to manage and test controls that are vitally important to the integrity of our markets,” said Mark Steward, executive director of enforcement and oversight at the FCA.

“These were serious and prolonged failures. We expect all firms will take this opportunity to ensure they can fully detail their activity and are regularly checking their systems so any problems are detected and remedied promptly, unlike in this case.”

Goldman is the latest investment bank to have been hit with a major fine for failures in transaction reporting compliance under MiFID. The FCA handed Goldman Sachs its biggest fine to date for the errors.

Earlier this month, UBS was fined £27.6 million for similar failures in more than 135 million MiFID transaction reports. The Swiss investment bank failed to provide complete and accurate information for around 87 million reportable transactions, and reported 49 million transactions which were not reportable, the FCA said.

Twelve other financial institutions have been penalised by the FCA, including Merrill Lynch, which was fined £13 million in 2015, Deutsche Bank, which paid £4.7 million in 2014, and Royal Bank of Scotland, which was fined £5.6 million the year prior.

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The UK’s financial regulator has handed UBS a fine of £27.6 million for failings related to more than 135 million MiFID transaction reports.

The Financial Conduct Authority (FCA) said in a statement that between November 2007 and May 2017 UBS made 135.8 million errors when reporting its transactions over the course of the nine and a half year period.

The investment bank failed to provide complete and accurate information for around 87 million reportable transactions, and reported 49 million transactions which were not reportable.

“Firms must have proper systems and controls to identify what transactions they have carried out, on what markets, at what price, in what quantity and with whom. If firms cannot report their transactions accurately, fundamental risks arise, including the risk that market abuse may be hidden,” Mark Steward, FCA executive director of enforcement and market oversight, commented.

The investment bank also failed to fully control and take care to organise its reporting operations, the FCA added, with failings related to UBS’ change management processes, maintenance of reference data, and testing whether the reporting was accurate.

“Many may be surprised that the FCA should levy such a large fine for breaches under the previous MiFID reporting regime,” David Nowell, senior regulatory reporting specialist at Kaizen Reporting told The TRADE. “However, it is a clear sign of the FCA’s tenacity and determination to strive for complete and accurate transaction reporting. It is also a message that could strike fear in the hearts of many senior managers as the new MiFIR transaction regime is far more complex than the previous MiFID regime.

“The FCA has been clear and consistent in its demands for complete and accurate transaction reporting; this latest fine is a strong and timely reinforcement of this message.”

UBS is the latest institution to be hit with fines related to errors with MiFID transaction reporting. Twelve firms have been penalised by the FCA, including Merrill Lynch, which was fined £13 million in 2015, Deutsche Bank, which paid £4.7 million in 2014, and Royal Bank of Scotland, which was fined £5.6 million the year prior.

The fine of £27.6 million handed to UBS is the largest penalty to date, although the bank qualified for a 30% discount after agreeing to resolve the case. Without the discount, the FCA said that UBS would have been fined £39.4 million.

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Advice to the European Commission, Council and Parliament, authored and published by the European Securities and Markets Authority (ESMA), stated that certain platforms ought to be subject to the regulation, according to three broad categories.

Those platforms trading crypto-assets that have a central order book and/or match orders under other trading models are likely to qualify as multilateral systems and therefore should operate under MiFID II regulation, ESMA said.

Similarly, platforms that are dealing on own account and executing client orders against proprietary capital would qualify as broker dealers, rather than as a multilateral trading venue, and so should also comply with the requirements.

ESMA outlined that the key MiFID requirements that crypto platforms could be subject to include pre- and post-trade transparency rules, and transaction and trade reporting. However, the authority stressed that there are areas of the legislation that may need to be reconsidered to allow for an effective application of the rules for crypto-assets.

“Some crypto-assets may qualify as MiFID financial instruments, in which case the full set of EU financial rules would apply,” Steven Maijoor, chair of ESMA, commented. “However, because the existing rules were not designed with these instruments in mind, National Competent Authorities (NCAs) face challenges in interpreting the existing requirements and certain requirements are not adapted to the specific characteristics of crypto-assets.”

For crypto-assets that do not qualify as MiFID financial instruments, ESMA added that at a minimum, Anti-Money Laundering (AML) rules should apply alongside risk disclosure, to ensure consumers are aware of potential risks before investing in crypto-assets funds.

“A number of crypto-assets fall outside the current financial regulatory framework,” Maijoor added. “This poses substantial risks to investors who have limited or no protection when investing in those crypto-assets. In order to have a level playing field and to ensure adequate investor protection across the EU, we consider that the gaps and issues identified would best be addressed at the European level.”

ESMA suggested that for crypto-assets outside of the MiFID scope, EU policymakers could consider establishing a bespoke regime to allow for tailoring of the rules to address the risks and issues associated with crypto-assets.

The regulator’s second and final scenario for EU policymakers looking at crypto-assets outside of the MiFID scope is to ‘do nothing’. This would see authorities consider that these crypto-assets fall outside of their remit and no further action should be taken.

However, ESMA warned that this option does not address the known threats to investor protection and market integrity, and so urged that a bespoke regime is the most appropriate course of action.

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The market maker said it wants to become an equities SI due to demand from investment firms for complementary sources of liquidity.

By becoming an SI, Citadel Securities said counterparties will be able to trade bilaterally with the company through the SI or multilaterally via an exchange.

The firm is already experienced with bilateral trading, operating its Citadel Connect platform, which is a single dealer equities platform in the US.

It will also consider expanding its SI offering to other asset classes in the future, such as fixed income or ETF, depending on demand.

“Our decision to become an SI is rooted in our desire to access and provide liquidity to a wide variety of flow types under Mifid II,” said Remco Lenterman, global head of business development for Citadel Securities.

“We view the SI regime as an important step towards ensuring a more transparent framework for bilateral trading, which will benefit all market participants and complement other sources of liquidity in the market.”

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big xyt, which has been providing data analytics to banks, clearing houses and trading venues since its founding three years ago, has today launched the Liquidity Cockpit to help buy-side traders get better visibility of dark and lit liquidity.

Restrictions on trading in the dark are expected to increase the reliance on trading under the LIS waiver, which is exempt from MiFID II’s dark trading caps. The caps are seen as being so onerous that a significant portion of stocks that make up major indices like the FTSE 100 will not be tradeable in the dark for a period beginning in January 2018.

The Liqudity Cockpit will provide a normalied view of trading in tick granularity across Europe’s markets, capturing trades from venues and reporting facilities. Data can be downloaded or processed by visualisation and analytics tools to help the trader better investigate market activity.

Robin Mess, CEO of big xyt, said: “We have set out to build the tools necessary to navigate a data and analytics driven trading environment. We look forward to expanding our collaborations with the industry at large, as we envisage the Liquidity Cockpit becoming an invaluable asset to heads of trading and their teams, for both buyside and sellside firms as well as trading venues.”

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The bank is the first to reveal its plans for unbundling of execution and research costs, with its full suite of analyst research costing £350,000.

In a letter seen by Bloomberg, Barclays has put forward three tiers of research, with its gold offering providing all reports and some analyst meetings. It cheapest deal is thought to cost £30,000.

Currently, most asset managers do not pay for research directly, instead receiving a wide range of analyst reports and paying for it via either execution commissions or through a commission sharing agreement.

MiFID II will force firms to unbundle, meaning investment banks must price their research offerings. However, this is the first time an investment bank has put a hard dollar price on its whole research product.

Other banks are thought to be working on pricing ahead of the MiFID II deadline at the beginning of 2018, but a wide variety of different price points are expected depending on the size of the analyst team, stock coverage and the number of reports required.

Over the weekend, it was revealed that Deutsche Asset Management has created its own internal research division to help it keep more control of its research costs once MiFID II is introduced.

Deutsche’s research division will help fund managers identify investment opportunities and provide clients with regular analysis on macro-economic developments.

It is understood that Stuart Kirk, former head of Deutsche Bank’s thematic research, has moved to the asset management division to head up the research institute.

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But you might want to scrap any plans you had of relaxing, with the oppressive heat of MiFID II bearing down on you, this will not be the calm, relaxed summer we’ve gotten used to.

There’s less than six months left until European investments and markets face what is arguably one of the biggest regulatory overhauls of any industry in history. The sheer scope and complexity are mind boggling and the clock is ticking, you really can’t ignore those emails for another week.

And it’s not just MiFID II, the political and macro-economic environment are also rather febrile these days. There are multiple rumours that Britain’s ruling Conservative Party is in for a summer of plots against its leader, Theresa May, after she lost her Parliamentary majority in a June general election. With Brexit negotiations having only recently kicked off, any political upsets in the UK have the potential to have wide-ranging impacts.

And elsewhere, economies continue to reel from the effects of the financial crisis even today. Growth in the west has remained sluggish, and despite some recent good news, even the Chinese economic powerhouse is slowing down as well. While markets have been relatively calm so far, the potential for some major world even to change that is ever-present.

You may now be wishing you hadn’t been reminded of the trials ahead, but thinking about them now and putting the quiet summer months to good use planning for the future will hopefully pay dividends when MiFID II hits in January.

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The poll of 52 asset managers across North America, Europe and the Asia-Pacific, found that more than half of asset managers have seen an increase in fixed income electronic trading over the past year. Half of respondents also said liquidity conditions in fixed income have improved in the same period.

The survey also found a significant difference in attitude towards electronic fixed income trading between Europe and the US, largely due to MiFID II.

Liquidnet found 86% of European traders believe the regulation is driving more corporate bond trading onto electronic venues, while just 39% of US traders thought the same. Firms in Europe are, not surprisingly, far more pro-active on MiFID II with 91% of traders saying they were aware of their firm’s plans around the regulation, compared to just 25% in the US.

“MiFID II is driving global standards: As the January 2018 deadline draws closer, the implications of the European-based legislation has attracted interest from a global audience with gaps emerging between US and European traders,” Liquidnet said.

OMS integration is seen as a crucial factor in supporting electronic trading of fixed income, with 58% of respondents saying it was an important issue when selecting a trading venue. Venues having a “critical mass” of liquidity was also a major concern.

Mark Pumfrey, head of EMEA at Liquidnet, said: “Although a European regulation, MiFID II has far reaching implications as global trading firms start to deploy best practices around compliance, transparency, and audit trails across both Europe and the US.

“As discussions with our members around the impact of MiFID II evolve, we expect the gap between US and European markets to narrow, with the US increasingly directing more volume toward electronic venues.”

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According to a written response to the Commission’s amended MiFID II regulation, Nasdaq said SIs will benefit from lax rules around tick sizes and transparency, giving them an unfair advantage.

The Commission has already made an unprecedented move to clamp down on SIs by issuing revised delegated regulation preventing them from networking together, after rumours emerged earlier this year that several investment banks were planning to link their SIs and make them function in a similar manner to broker crossing networks, which will be banned from January 2018.

In its submission, Nasdaq said: “the ability of SIs to improve prices without respecting tick sizes means SIs will be allowed to offer marginally better prices to clients. In conjunction with best execution requirements, this means SIs are extremely likely to capture significant trading flows.

“Second, control over the timing of trade publication on SIs (up to 1 min) will give SIs a considerable advantage over market makers on public markets.”

It warned that leaving these issues unresolved could have unintended consequences, such as trading shifting to less transparent environments, market makers becoming SIs and not providing liquidity for public markets, and higher levels of risk in the market.

Nasdaq has asked the Commission to make targeted changes to both its level 2 and level 3 regulation.

It wants RTS 1, Article 10 to be amended to specifically state that executions must be at price levels compliant with the tick size regime.

It also asked for clarification on trade publication, which is required to take place “as close to real-time as is technically possible” but must be within one minute. Nasdaq argues a minute is a very long time in modern trading and the rules should set more specific limits to ensure all trade publication happens as soon as possible.

Many investment banks are considering whether to register as an SI or become a multilateral trading facility (MTF) once broker crossing networks are banned next year. It is thought many will prefer to become SIs due to the regulatory burden of running an MTF.

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