SmartStream Adds Derivatives to MiFID Solution

Reference data utility (RDU) solutions provider SmartStream Technologies has added support for derivatives in its Systematic Internaliser (SI) registry service to help clients meet the Markets in Financial Instruments Directive II (MiFID II) deadline of September 15, 2020. This allows trading counterparties to identify who is responsible for reporting trades in general, but also the most complex part of the SI Regime which now includes derivatives.

The firm says the MiFID II SI Regime for derivatives will be the most challenging component which needs to handle a very complex classification scheme. The service further strengthens SmartStream’s partnership with the APA (Approved Publication Arrangements) community as the RDU continues to be the sole distributor of the SI Registry, which provides SI status across equity, fixed income and derivative instruments.

The SI registry is a market initiative where SmartStream in collaboration with a group of APAs, including: Bloomberg, Deutsche Boerse, MarketAxess, TradEcho and Tradeweb, enable SIs to register, the financial instruments for which they are providing SI services, in a centralised database. Additionally, the new API service takes the complexity out of traversing between an ISIN and the associated Classes of Financial Instruments Approach (Cofia) SI status for derivatives – the firm says this will drastically simplify a customer’s ability to identify counterparty SI status, allowing for faster adoption and ultimately compliance of the upcoming regulation.

The MiFID II SI Regime mandates that the SI test is conducted differently depending on the asset class. For derivatives, the SI determination is based on the volume of trades across a class of instruments, and not just at the ISIN level. To meet the September deadline firms will have to handle a complex ESMA classification scheme in order to be compliant.