MiFIR Data Reporting Q&A Update: FX Forward Example (Q17)

October 7, 2019

ESMA have updated their documentation on how to report FX Forwards for MiFIR when trading on exchange. Please see the example below;

Please see EMSA MiFIR Data Rpeorting Q&A.

Question 1

How should a transaction carried out on a trading venue on a FX forward be reported under
Article 26 and Article 27 of MiFIR?

Answer 1

Example:

On March 13th, 2018, investment firms A and B enter in a EUR/GBP (the currency mentioned first is the ‘base’ currency, while the other currency is the ‘terms’ or ‘quote’ currency) FX forward instrument on a trading venue. The instrument has the following characteristics:

  • Notional of the instrument: €1M;
  • Effective date of the transaction: March 15th 2018 (T+2);
  • Expiry date of the instrument: September 15th 2018;
  • The tenor of this instrument is 6 months;
  • ISIN code of the financial instrument: EZ1234567891;
  • The price of the instrument is the FX forward rate expressed as a price of base currency in the quoted currency according to the market convention for the currency pair;
  • The EUR/GBP FX forward rate reference is 0.8200.

The counterparty that is receiving the currency which is first when sorted alphabetically by ISO 4217 standard should be identified as the buyer.

In our example, investment firm A who will (in 6 months) deliver the GBP and receive the EURis the buyer of the FX forward, while investment firm B who will (in 6 months) receive the GBP and deliver the EUR is the seller of the FX forward.

 

 

The price should be populated with the forward rate expressed as a price of base currency in the quoted currency and the monetary value XML tag should be used.

In the quantity field #30 the executing entities (buyer and seller) should report the amount of the FX forward in the base currency. The quantity in field #30 in the transaction report is always shown as positive.

In the quantity currency field #31, the executing entities (buyer and seller) should report the base currency of the FX forward.

The price currency field should be populated with the term / quote currency (i.e. GBP in this example).

Although the examples show the reports of firm A, the reports of firm B would be identical.

 

B) As per article 27 of MiFIR, the trading venue or SI admitting to trade or trading this instrument shall report it in FIRDS. The following table shows the expected reporting of the instrument reference data by trading venues or SIs (only the relevant fields are displayed):

Notional currency 1 should be populated with the 1st currency when sorted alphabetically by ISO 4217 standard.

Notional currency 2 should be populated with the second currency when sorted alphabetically by ISO 4217 standard.