The forex is it subject to the transaction reports of the MiIFID II
Forex trading is subject to transaction reports of the MiFID II?
Because of the ambiguity, conflicts with other regulations and loopholes, many of the details on how to comply with the new regulations such as MiFID II, which will enter into force in January 2018 could be very long to implement.
The reports of transactions of the MiFID II
Regulation MiFID II is divided into several sets of rules. One of them is called “Markets in Financial Instruments and Amending Regulation”, or “MiFIR”. The MiFIR focuses on the rules of monitoring and reporting on the execution of financial operations.
Among the sections of the MiFIR is the title IV transaction Reporting”. Similar to the reports required under the regulations EMIR, MiFIR is a ratio T + 1 which details the information relating to trades of an individual. The relevant information that must be reported is the information on the buyer, the seller, the price, the quantity, location, the number of the ticket, the data on maturity and the underlying currency of the product.
That is what should be reported?
The MiFID II expanded the selection of financial instruments involved. In addition to transactions on shares and derivatives based on stock, it includes all the financial instruments that are traded or based on the exchanged product.
The obligation laid down in paragraph 1 of article 26.2 of MiFIR applies to the following categories :
(A) The financial instruments that are admitted to trading on a trading venue or for which a request for admission to trading has been made;
(B) financial instruments where the underlying is a financial instrument that is traded on a trading venue;
(C) financial instruments where the underlying is an index or a basket composed of financial instruments traded on a trading venue
The obligation applies to transactions on financial instruments referred to in points (a) to (c) even if they are not executed on a trading venue.
As shown in the text above, the products traded and the products based on the products traded within the scope of the statement of transaction of MiFID II.
This includes equity indices, CFDS based on futures contracts and CFDS on shares.
What is the trading offered by the forex brokers, CFD and binary?
In relation to the trading of forex in detail, we must first define the product. The forex products in detail are :
Over-the-counter (OTC)
Based on the price of the Spot Forex
With a leverage effect
No immediate delivery
The european commission has classified the forex retail as a financial instrument because of its “indefinite renewal” and, therefore, as a derivative of CFDS. Most of european securities regulators, like the FCA in the Uk and CySEC in Cyprus, therefore consider that the foreign exchange transactions of retail derivatives which fall within the regulation “EMIR Reporting”.
However, for MiFID II, the simple fact of being a derivative does not include the product in the context of transaction reporting. It is also necessary that the derivative itself or the underlying product on which the instrument is based is exchanged through a space of negotiation.
In relation to the trading currency, 99% of the transactions are based on prices for OTC and not on a price based on a trading venue. Theoretically, they do not therefore come under the reporting obligations of MiFIR.
1% of forex transactions are executed on trading venues that are registered by the EU (for example on the stock exchange MTF LMAX), but the definition of a place of negotiation of the MiFID II includes some of the ECN brokers. This should ultimately increase the number of forex transactions on the trading venues.
ESMA and the national regulators have not yet issued specific advice on the question of whether the trades in the forex must be declared.
Despite the additional cost, the brokers cautious will probably put in place a system of reporting, because even if derivatives forex are not based on the products traded, the financial regulators could close this loophole by adding the currencies.
