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• Trading of OTC products on fully electronic platforms (i.e. no “Voice” trading, for example).
• Central clearing of OTC products
• Reporting of OTC trades into new Repositories

A  A fourth area should also be considered:

• Best Practice (“External Business Conduct“) rules

Each  Each of these will have an impact on FX trading, however this page will only address the required Trading and Best Practice changes.

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• FX NDFs are in scope.
• FX Blocks, FX Swaps and FX Forwards arecurrentlyare currently exempt from the trade execution, mandatory clearing and margin requirements.
• FX Blocks, FX Swaps and FX Forwards are still subject to reporting requirements (met via Maker and Venue forwarding them on to the Trade repository held at the DTCC).
• FX Blocks, FX Swaps and FX Forwards are still subject to Best Practice requirements (disclosure of pre-trade mid-market prices).

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These 13 Currencies comprise the 13 most liquid currencies (excluding the Korean won, which is a restricted currency) of the set of 17 currencies settled on CLS.

Summary:

• Makers must provide a Market Mid Rate on FX NDF quotes.
• Makers may need to provide a Market Mid Rate on FX Blocks, FX Swaps and FX Forwards quotes. This will be either be because they cannot meet the terms of the no-action letter noted above, because the quote is for an illiquid currency pair, or because the FX Block or FX Swap includes a non-deliverable component.
• Makers do not need to provide a Market Mid Rate on FX ON, TN and Spot quotes.
• TBD - How do we provide a Market Mid Rate for a Cross? There is more than one ‘market’ here. Presumably we compute the cross based on the mkt rates of each component, and take the mid of that?

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The concept of a Unique Trade Identifier (UTI) is similar to the Unique Swap Identifier (USI) which is required for CFTC reporting ( US Dodd-Frank regulation), but is nevertheless more complicated as – under EMIR – both parties report whereas for CFTC the USI is issued by the reporting party on the transaction.

MiFIDII

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Brief History

The Markets in Financial Instruments Directive (commonly referred to under the acronym MiFID) is a legislative regulation directive, composed by the European Union (EU) on the basis of advice provided by the European Securities and Markets Authority (ESMA). The directive is intended for application by the European Member States, their regulatory authorities, and financial firms and institutions registered within the European Economic Area (EEA). The legislation is for:

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The MiFID II Framework

MiFID II will contain contains a framework separated into two parts, the 'level 1' framework was established in 2014, and contains the following areas:

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Level 1 can then be supplemented by a number of implementing measures, (referred to as 'level 2' legislation) These measures will take two forms;

• 'Delegated acts', drafted by the European Commission (EC) on the advice of ESMA
• 'Technical Standards', drafted by ESMA and approved by the EC.

The Main Changes to MiFID

MiFID II will establish establishes provisions that the author's state is are aimed to ensure that High-Frequency Trading (HFT) does not have an effect on market 'quality or integrity' by implementing implementation of the following requirements as a general overview:

• MiFID II will compel compels HFT firms engaged in proprietary trading to be authorised under MiFID. 
• Introduce system System and control requirements on the use of algorithms, . HFT firms that are also making into trading venues using automated strategies will be are required to enter into market making agreements with the those venues. This measure is an attempt to ensure that market participants provide liquidity on a consistent basis.
• Trading venues will be are compelled to set limits on the maximum number of order messages that any market participant can send relative to transactions they undertake.
• Trading venues will be are compelled to set a minimum incremental 'tick size' this is presently done on a venue by venue voluntary basis (It should be noted that this is presently widespread within FX).
• There will be an introduction of controls Controls on venue pricing to ensure transparency and the levelling of any discriminatory or penalising practices, in addition to controls on excessive order messaging.

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Key Requirements

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Refer to ESMA FAQ for market implementation details (original here).

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MarketFactory along with other venues and market participants will need needed to add a series of new fields for reporting purposes on;

• New Orders (New Order Singles)
  venues will look to add a Legal Entity Identifier (LEI) MiFID II requires that firms will not be able to execute a trade on behalf of a client who is eligible for a LEI and does not have one.
  Execution Venue MIC (A market identifier code which is unique in its ability to identify securities trading exchange).
  Finally the requirement for a pre-Trade Waiver Indicators (Used for orders that are large in scale, held in an order management facility pending disclosure, actionable indications of interest in request-for-quote waiver indicators are likely to be the illiquid instrument and the specific size).
• Quote Messages (Snapshots and Incremental Refresh)
  New fields may include Execution Decision Maker containing the decision maker and likely to contain the algo shortcode, this field will be mandatory for in-scope products.
• Outbound Executions (Execution reports)
  Must contain a LEI
  Execution Decision Maker
  Algorithmic Order Flag, set if the order was algorithmic.

Excluded from Scope

FX Forward contracts are outside the scope of MiFID II if they satisfy all of the following conditions: 

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