MIFID II and Data Management Issues

May 31, 2018 by Xoriant Corporation

Markets in financial instruments directive (MiFID) is a regulation that increases the transparency across the European Union’s financial markets and standardizes the regulatory disclosures required for particular markets.

From 3 Jan 2018, MiFID is implemented all around the globe; MIFID II says “NO LEI NO TRADE”, hence it has made presence of LEI mandatory. Has MiFID been implemented without hiccups? Does MIFID II face any data management issues?

Since 5 months MiFID II is up and a running regulation but still it has not finished its business smoothly. Yet there are assorted issues pertaining to data which are unresolved and uncaptured like companies or brokerage houses which fall under MiFID II have to maintain LEI and ISIN information for both the entities involved in any financial transaction.

Biggest challenges in maintaining data related to MIFID is rapidly increasing no. of LEI around 6 months back number of LEI issued was 650k and as of now it is 1185k, LEI data is increasing manifolds day by day and it becomes difficult to track and maintain this data. This incremental LEI data has also resulted in ESMA to delay its LEI requirement in transaction reporting under MIFID II.

Another challenge in data management related to MIFID is sourcing and ISIN data which is used in transaction reporting .while identifying OTC securities. As ESMA had chosen ISIN be mandated as standard identifier for financial instruments, it become mandatory to have ISIN data for any security been traded. To arrange ISIN for derivatives, both listed and over-the counter (OTC) is the biggest problem as from last many years ISIN was not a mandatory field for transaction reporting until MIFID II implementation

There are generic data issues faced by any organization working on reference data, like data cleansing, data de-duplication, data sourcing and mapping. Apart from these generic data issues MiFID brings along data glitches like instrument-specific changes in case of corporate action and frequent name changes. To resolve such issues over the coming months, data sourcing must be done via 3rd party data vendors which have trusted data for LEI and ISIN information. Data vendors which work on proactive maintenance of LEI data and are regress with their approach to manage LEI data must be preferred for further become a trusted partner for data sources. ISIN data keeps changing on regular basis and also to maintain and track ISIN change for the huge data count of for all financial identifiers of financial securities including OTC securities is a cumbersome task.