The client is a company that manages foreign exchange transactions for clients across EMEA. Their traders provide expert risk management at market leading rates. The company provides a suite of online capabilities, structured products, customised analysis and consultancy services.
As an update to the 2007 Markets in Financial Instruments Directive, MiFID II applies to financial industry players that operate and / or do business with European firms providing investment services, such as investment banks, portfolio managers and brokers. The new directive seeks to increase market stability and confidence, therefore the detail required in transaction reports will increase, including personal details to identify execution and investment decision makers, LEIs (unique legalentity identifiers) and trade details. As a financial company the client must become compliant with MiFID II and the solution chosen for achieving this was the integration with the Bloomberg solutions, BTRL and RHUB.
Bloomberg Trade Repository (BTRL), approved by the European Securities and Markets Authority (ESMA) as a reporting house for derivatives trades accepts reporting for commodities, credit, FX, equities and interest rate derivatives trades mandated under the European Market Infrastructure Regulation (EMIR).
Bloomberg is authorised by the UK Financial Conduct Authority (FCA) for its Approved Reporting Mechanism (ARM) and also for its own Approved Publication Arrangement (APA).
Bloomberg’s ARM allows companies to enrich their transaction reports with data from Bloomberg or third-party order management systems. BTRL is also integrated with Bloomberg Regulatory Hub (RHUB), a platform that connects to the Bloomberg APA and ARM to help firms comply with their regulatory reporting-related obligations.
Under MiFID II, financial companies are required to make public through an APA certain transaction information, and Bloomberg’s APA will allow the publication of required trade details when MiFID II goes live.
Synetec’s solution for the compliance regulations consists of specific implementations for each type of report required by the NCAs.
The EMIR implementation involves sending of the trade and company details using XML files with specific fields (PGP encrypted) using SFTP connectivity. The report file is uploaded into the Bloomberg’s BTRL, processed and the results of the processing are available within the Compliance module of the client’s order management and trade execution system for further amending (in case it is necessary).
The ARM implementation also involves sending of the trade details using files and SFTP connectivity, in CSV file format with specific header and content. The report file is uploaded into the Bloomberg’s RHUB, processed and the results of the processing are available through the Bloomberg terminal. The users can see the successfully submitted trades, the trades that need further modifications, and for these trades the amendments can be made using the client’s system and will automatically be resubmitted.
The APA implementation involves sending the post-trade details for a trade and counterparty as a message, using the Financial Information eXchange (FIX) Protocol. The FIX Protocol has been chosen as it is the global messaging standard across the financial industry for pre-trade, trade and post trade communication. The required fields are sent from the client’s system to Bloomberg and after processing the trade is published to the Bloomberg’s APA website. In case of any necessary amendments the client has the ability to perform these amendments from within its system.
The main challenge encountered during Synetec’s implementation comprised mostly of determining exactly the proper data needed to be sent in each of the required fields, for the different report and instrument types required by the NCAs. This challenge has been overcome by Synetec’s team of project managers, business analysts and software engineers working closely together with the client and Bloomberg’s implementation team.
Through a deep understanding of the MiFID II reporting requirements and the technical ability to pull the integration quickly Synetec’s team was able to provide a bespoke solution that ensured the client met their regulatory obligations in a very short space of time.
Written by Constantin Huiung, a software engineer at Synetec, one of the UK’s leading providers of bespoke software solutions