BREXIT and implications for MiFIR Transaction Reporting

October 11, 2020

Since 31/01/2020, the UK and the EU has been operating under the terms of the Withdrawal Agreement.

The Withdrawal Agreement includes a transition period from 31/01/2021 to 31/12/2021 which was intended for the EU and UK to negotiate and agree the terms of their new relationship.

During the transition period the UK still follows all EU rules, including the transaction reporting obligations for MiFIR.

How transaction reporting is affected after the transition period, is dependent on what happens between now and 31/12/2021 (the proposed date for end of the Transition Period).

Here are a few possible scenarios;

  1. Hard Brexit
  • Britain leaves with no specific deal with the EU
  • Britain and the EU trade on World Health Organisation terms
  • Impacts on Investment Firms and Branches for MiFIR Transaction Reporting if regulated in;
UK EU
ARM Need to submit to an ARM regulated by the FCA Need to report to an ARM regulated in the EU
Reportability / FIRDs Reportable instruments will include those listed in the EU and UK (see UK comment Article 26: 3b) Reportable instruments in the EU will exclude those listed in the UK only (i.e. not dual listed)

 

  1. Transition Period Extension
  • EU and UK agree to extend the transition period under the current terms
  • Firms continue to report as they are currently
  1. Any Other Agreement
  • The deal, yet to be announced, which would have a ruling on how the transaction reporting obligations should be handled.

 

Whichever course of action is taken, the FCA has stated in Market Watch 64 “Firms should comply with the changes to their regulatory obligations by the end of the transition period on 31 December 2020” (MW 64).

However, the FCA has stated they will exercise some leniency on the reporting requirements stating “we do not intend to take enforcement action against firms and other regulated persons for not meeting all requirements straight away, where there is evidence they have taken reasonable steps to prepare to meet the new obligations by 31 December 2020.“ (FCA BREXIT TTP, Key Requirements)

 

Additional Sources:

https://www.bbc.co.uk/news/uk-politics-32810887

https://www.fca.org.uk/markets/market-data-regimes/fca-firds-and-transaction-reporting

UK Amendments to EU Regulations: MIFIR: Article 24: Transaction Reporting

EU MiFIR: Article 24: Transaction Reporting