MiFIR transaction reporting — how a report is built

Most MiFIR reporting failures are not field errors. They are scope errors — reporting something that is not a transaction, or missing something that is. Delegated Regulation (EU) 2017/590, RTS 22, answers both: Article 2 defines what a transaction is for Article 26 purposes, Articles 3 and 4 decide whether your firm executed it or merely transmitted it, and Article 15 sets out the controls a reporting arrangement must contain. Together they specify the reporting system, not the file. This piece covers scope, the exclusions, the execution-versus-transmission test, the identifiers, the branch rule and the eight mechanisms.

1. The obligation, and its edges

Article 26(1) of Regulation (EU) No 600/2014 requires investment firms which execute transactions in financial instruments to report complete and accurate details as quickly as possible, and no later than the close of the following working day.

The scope in Article 26(2) has three limbs, and the last two are where firms trip. It covers instruments admitted to trading or traded on a trading venue, or for which a request for admission has been made; instruments whose underlying is an instrument traded on a trading venue, irrespective of whether the transaction is on the venue; and instruments whose underlying is an index or basket of instruments traded on a trading venue. An entirely off-venue derivative can be in scope because of what it references.

Submission can come from the firm, an ARM acting for it, or the venue through whose system the transaction completed — but the firm stays responsible for accuracy except where the failure is attributable to the ARM or venue. Under Article 26(5) the venue operator separately reports transactions executed through its systems by any member or user not subject to MiFIR. Format is fixed: Article 1 of RTS 22 requires the Annex I Table 2 standards, machine-readable, in a common XML template following the ISO 20022 methodology.

2. What counts as a transaction

For Article 26 purposes, the conclusion of an acquisition or disposal of a financial instrument is a transaction. Each limb contains a derivatives case that is easy to miss:

Article 2(4) adds a case with no economic movement: a simultaneous acquisition and disposal where ownership does not change, but post-trade publication is required under Articles 6, 10, 20 or 21 of MiFIR.

3. The exclusion list, and the two carve-backs

Article 2(5) lists fifteen things that are not transactions for Article 26 purposes, on a consistent logic: where no investment decision is taken at the moment of the event, there is usually no transaction.

• Securities financing transactions as defined in Article 3(11) of Regulation (EU) 2015/2365 — reportable, but under the SFT regime;
• a contract arising exclusively for clearing or settlement, or a settlement of mutual obligations where the net obligation is carried forward;
• an acquisition or disposal solely from custodial activity or solely from a transfer of collateral;
• a post-trade assignment or novation, a portfolio compression, or the creation or redemption of units of a collective investment undertaking by its administrator;
• the exercise of an embedded right, or conversion of a convertible bond and the resulting transaction in the underlying;
• creation, expiration, redemption or a notional change under pre-determined terms or mandatory events, where no investment decision is taken at that point;
• a change in index or basket composition after execution, an acquisition under a dividend re-investment plan, certain employee share incentive plan and residual-fractional-share transactions, and pre-determined exchange and tender offers on securitised debt.

The employee-plan exclusion bites only where all four criteria hold, including a delay of at least ten business days between decision and execution and value capped at EUR 1,000 per one-off transaction or EUR 500 per investor per instrument per month. Two carve-backs close the list: the SFT exclusion does not apply where a member of the European System of Central Banks is a counterparty, and the pre-determined-events exclusion does not apply to public offerings, placings or debt issuance.

4. Did you execute it, or transmit it?

Article 3 deems a firm to have executed where it provides any of five services or activities resulting in a transaction: reception and transmission of orders; execution of orders on behalf of clients; dealing on own account; making an investment decision under a discretionary mandate; and transfer of financial instruments to or from accounts. The last catches activity many firms do not think of as trading.

A firm is not deemed to have executed where it transmitted the order under Article 4 — a conditions test, not a label. Transmission counts only if the order came from a client or the firm’s own discretionary decision; the prescribed details were passed to a receiving firm; and that firm is itself subject to Article 26(1) and agrees to report the resulting transaction or transmit onward on the same terms. The agreement must fix the time limit for providing order details and require the receiving firm to verify whether they contain obvious errors or omissions.

Ten order details travel with the order where pertinent, from the instrument code and direction through to the commodity-derivative risk-reduction indication under Article 57 of Directive 2014/65/EU; in a chain, the client details are those of the first transmitting firm. Transmission is a status a firm earns and documents: absent the agreement and the details, it executed and owes the report.

5. What the report has to identify

The executing firm identifies itself with a validated, issued and duly renewed ISO 17442 legal entity identifier. Article 13(2) then imposes a hard commercial gate: a firm shall not provide a service triggering a reporting obligation for an LEI-eligible client before obtaining that client’s LEI. An onboarding control, not a reporting one.

Natural persons are identified by concatenating the ISO 3166-1 alpha-2 code of the person’s nationality with the national client identifier from Annex II, taking the highest priority identifier available whether or not the firm already knows it. Where Annex II gives CONCAT, the identifier is date of birth as YYYYMMDD, then five characters of the first name and five of the surname — prefixes excluded, short names padded with #, upper case, no punctuation or spaces.

Three designations carry judgement rather than data. Where more than one person takes the investment decision, the firm determines who bore primary responsibility using pre-determined criteria it has established — so the criteria must exist before the trade. An algorithm designation must be unique per set of code or trading strategy regardless of instrument or market, and unique over time. Short sales are flagged on a best-effort basis where the client is the seller, with a further flag for the firm’s own short sales under the exemption in Article 17 of Regulation (EU) No 236/2012.

6. Branches: one report, four country-code tests

Article 14 sets three rules a group with branches must encode. Transactions executed wholly or partly through a branch go to the competent authority of the firm’s home Member State unless home and host authorities agree otherwise; the transaction is reported only once; and the branch country code is used only where the branch received the order or made the discretionary decision, supervises the person responsible for the decision or for execution, or the transaction was executed outside the Union using the branch’s own venue membership. Where none applies, the field takes the home Member State code — or, for a third-country firm, the country of its head office.

A third-country firm’s branch instead reports to the authority that authorised it; with branches in several Member States, they jointly choose one.

7. The eight mechanisms Article 15(1) requires

This provision turns reporting from a file into a controlled process. The methods and arrangements by which reports are generated and submitted must include:

• security and confidentiality systems for the data reported;
• mechanisms for authenticating the source of the report;
• precautionary measures enabling timely resumption after a failure of the reporting system;
• mechanisms for identifying errors and omissions within reports;
• mechanisms to avoid duplicate reports, including where a firm relies on a venue under Article 26(7) of MiFIR;
• mechanisms ensuring a venue only submits for firms that chose to rely on it;
• mechanisms to avoid reporting where there is no obligation under Article 26(1) — no transaction under Article 2, or an instrument outside Article 26(2);
• mechanisms for identifying unreported reportable transactions, including rejected reports never successfully re-submitted.

Three of the eight are about not reporting: over-reporting is a control failure on the same footing as under-reporting. The eighth is the one most often missing from a control inventory — a rejected report nobody re-submitted is an unreported reportable transaction. Article 15(2) turns any such finding into a duty to speak: on becoming aware of an error, a failure to submit or re-submit, or a transaction reported that was never owed, the firm must promptly notify the competent authority.

8. The reconciliation duty, and the position test

Article 15(3) requires arrangements ensuring reports are complete and accurate, naming two components: testing of the reporting process and regular reconciliation of front-office trading records against data samples provided by the competent authority. Where no samples are provided, Article 15(4) has the firm reconcile against the reports actually submitted — checking timeliness, field accuracy and completeness, and compliance with the Table 2 standards. No samples removes the input, not the obligation.

Article 15(5) sets a test easy to state and hard to pass: the reports, viewed collectively, must reflect all changes in the firm’s and its clients’ positions at the time transactions are executed. That portfolio-level check is the cleanest way to detect a whole missing category — notional adjustments, account transfers — that a field-by-field review never surfaces. Article 15(6) adds an audit point: where an ARM cancels or corrects a report on the firm’s instructions, the firm retains those details.

9. Three cases that decide the build

Three cases cover most of what goes wrong.

The firm that thought it was transmitting. A firm passes client orders to an affiliate that executes them, and reports nothing. Facts to rule: Article 3(1)(a) makes reception and transmission an executing activity, and the Article 4 exemption applies only where the receiving firm is subject to Article 26(1) and has agreed to report or transmit onward. What the practitioner does: locate the agreement; if it lacks the time limit and error-check terms, the firm executed and the open periods are under-reported, so it reports and notifies under Article 15(2).

The rejections nobody owned. An ARM returns a small daily rejection file; operations re-submits what it can and the residue ages out. Facts to rule: Article 15(1)(h) requires a mechanism for identifying rejections never re-submitted, and Article 15(2) prompt notification. What the reporting owner does: make the queue a zero-balance control with an owner and an age limit, and route what cannot be fixed into the notification path. Outcome: the residue surfaces before the regulator’s matching finds it.

The notional adjustments that never appeared. A pipeline reports opening and closing a derivative; the amendments between produce nothing. Facts to rule: an increase in notional is an acquisition and a decrease a disposal, unless the change follows pre-determined terms or mandatory events with no investment decision at that point. What the analyst does: add an amendment event to the model and split amendments into decision-driven and mandatory on the Article 2(5)(j) test. Outcome: the Article 15(5) position test passes.

10. What to do, today

• Run scope as a three-question decision layer per event: transaction under Article 2; excluded under Article 2(5); already reported by someone else.
• Build duplicate avoidance as a positive register of flows delegated to a venue or ARM, not as downstream de-duplication — matching catches exact duplicates and misses near-matches.
• Make the rejection queue a zero-balance daily control with a named owner; un-resubmitted rejections are unreported transactions.
• Check that every Article 4 transmission claim is backed by an agreement containing the time limit and error-checking terms, and put the LEI gate in onboarding rather than reporting.
• Write down the pre-determined criteria for primary responsibility before you need them, and encode CONCAT exactly.
• Add an amendment event to the transaction model so notional changes generate reports, classified against Article 2(5)(j), and run the Article 15(5) position test monthly.
• Document the resumption plan and retain every ARM cancellation and correction record.

Related: MiFIR, EMIR and SFTR compared · ESMA’s report once plan · MiFIR reporting in France · MiFIR reporting in Italy · MiFID II best execution – the new RTS