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Table of Contents


See also Whisperer Enterprise - Regulatory Fields.


Attachments

Background

Since the collapse of Lehman Brothers in 2010, politicians have wanted to bring the Over The Counter (OTC) derivatives markets under greater control. Their approach to this in the US Congress was to pass a long and complex reform law now referred to as the Dodd Frank Act, named after Chris Dodd and Barney Frank, the two senators who sponsored the bill. Having approved the Dodd Frank Act, the two major regulators, the Securities and Exchanges Commission (SEC) and the Commodities and Futures Trading Commission (CFTC) have transformed the 2300 page law into practical rules to be implemented by banks and financial institutions.

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Product Identification

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Where necessary products are identified with the use of International Securities Identification Numbers (ISINs), as defined by ISO 6166. Refer to https://prod.anna-dsb.com/ for a definitive list of valid ISINs.

For swaps, ISINs are typically maintained at the Leg level. Product-level ISINs are sometimes still supported, but most of the venues have completely moved away from that now, due to the regulatory clarifications provided back in 2017. A Body-Level PackageID should (but usually isn't) be provided to link the two legs together.

Whisperer Enterprise supports both models:

  • Should we receive a top-level ISIN for a swap, we will populate this in the NoBodyRegulatoryFields group with key MiFIDProductISIN.
  • Should we receive the leg-level ISINs for a swap, we will populate these in the NoLegRegulatoryFields group with keyLegMiFIDISIN.
  • Should we receive three ISINs (i.e. both legs and a single top-level one), all will be delivered as above.


Waivers and Flags

Pre-Trade Waivers and Flags are specified to indicate other details relating to the trade:

  • LargeInScaleWaiver - A Pre-Trade Block Size waiver indicator.
  • IlliquidInstrumentWaiver - A Pre-Trade Illiquid Instrument waiver indicator. As per Article 4(1)(b)(ii) of Regulation (EU) No 600/2014, the transaction is "in an illiquid share, depositary receipt, ETF, certificate or other similar financial instrument that does not fall within the meaning of a liquid market, and are dealt within a percentage of a suitable reference price, being a percentage and a reference price set in advance by the system operator".
  • SizeSpecificWaiver - A Pre-Trade Size-specific (trade of substantial size etc.) waiver indicator.
  • LiquidityProvisionFlag - Indicates that the Order is part of a liquidity provision activity.
  • AlgorithmicOrderFlag - Indicates that the Order was generated by algorithmic trading.
  • PackageTradeFlag - Indicates that the Order is considered a Package/aggregated transaction for reporting purposes. Includes Swaps, Blocks and Batches.
  • PackageID - related to the PackageTradeFlag. An identifier assigned to a collection of trades so they may be analysed as a single unit.
  • SystematicInternaliser - typically the Segment MIC code (as per ISO 10383) of the message sender, indicating it is a Systematic Internaliser. As  per  Paragraph (19) of Regulation (EU) No 600/2014, Systematic Internalisers "should be defined as investment firms which, on an organised, frequent systematic and substantial basis, deal on own account by executing client orders outside a trading venue". For each specific instrument, an investment firm is required to compare the trading it undertakes on its own account compared to the total volume and number of transactions executed in the European Union (EU). If the investment firm exceeds the relative thresholds determined in the Commission Delegated Regulation (EU) No 2017/565 it will be deemed an SI and will have to fulfill the SI-specific obligations. Refer to https://www.esma.europa.eu/press-news/esma-news/esma-updates-plan-systematic-internaliser-regime-calculations-and-publications for further details.
  • RiskReductionOrderFlag - In the context of ESMA RTS 22 Article 4(2)(i), signifies whether or not the Order is a transaction 'to reduce risk in an objectively measurable way in accordance with Article 57 of Directive 2014/65/EU'.
  • TradingCapacity - DEAL: Firm Deals on own account; MTCH: Firm trades in a matched principal capacity; AOTC: Any other trading capacity (e.g. Agency).
  • NonPriceFormingTrade - Transactions where the exchange of financial instruments is determined by factors other than the current market valuation of the financial instrument as listed under Article 13.

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