FinFrag Article 39 Regulation

What is FinFrag Article 39 Reporting?

FinFrag article 39 is the Swiss Financial Market Supervisory Authority (FINMA) mandate to create a level of equivalency with EU’s MiFID II. Article 39 states that participants admitted to a Swiss trading venue must report details of their transactions to a repository to ensure transparency of the market.

Firms caught by FinFrag article 39 can report details of their transactions to the SIX Swiss Exchange. This can be done in one of two formats depending on the type of firm you are:

  • ESMAs MiFID II format – as described in RTS 22. Firms already reporting for MiFID II, can use this form to route to SIX.   This format includes full scope of personal information required by MiFIR transaction reporting.  Foreign security dealers can use this format for reporting through an ARM recognised by the SIX Swiss Exchange (for example UnaVista ARM)
  • Swiss Format – for Swiss domiciled firms or optionally foreign dealers if they prefer. This format is described in FINMA Circular 2018/2 (margin numbers 27-30) and governed by the technical specifications.  This format allows for use of internal identifiers in place of personally identifiable information.  Using this format requires direct connectivity to SIX.

When did FinFrag Article 39 start?

  • 3 January 2018 - Foreign Securities Dealers started reporting in line with MiFID II
  • 1 October 2018 - Swiss Securities dealers must start reporting. All trades between 1 January-1 October 2018 must also be back-reported by 31 December 2018.
  • 1 January 2019 - Derivatives reporting begins. There is no need to back-report any trades.

Who does this affect?

FINMA requires all trading venue participants and other Swiss / foreign securities dealers which are admitted to a trading venue to report securities transactions to ensure the transparency of securities trading.

  • Which Security Dealers are in scope: Swiss Trading Participants, Remote Members, Swiss Reporting Members and foreign branches of Swiss securities dealers.
  • Which Financial instruments are in scope?
    • Equites: Financial instruments according to FINMA Circular 2018/2 margin no 9 which are admitted to a trading venue in Switzerland are subject to reporting obligations the list of instruments in scope is published daily by SIX.   
    • Equity based derivatives (both ETD & OTC): The duty to report trades and order transmissions in derivatives with one or several underlying instruments applies only if at least one underlying instrument is subject to reporting obligations and has a weighting of more than 25 % in the financial instrument traded
  • Which Transactions are subject to the reporting obligation: Trades and the transmissions of orders in reportable financial instruments done by securities dealers subject to the reporting obligation as an intermediary, shall report no matter if they were traded on- or off order book, executed on- or off exchange and regardless if the order is on behalf of a client or for proprietary trading.
    • For domestic and foreign members this is a two-sided reporting obligation
    • In case of cross trades executed on- or off order book, a transaction report for each side of the trade - for the buy- and sell-side - must be submitted.
    • A transfer in a reportable financial instrument from one custody account to another, regardless a change of beneficial owner, is not subject to the reporting obligation under the terms that no securities dealer subject to the reporting obligation took an active role in initiating the transaction/transfer. Direct client instructions to transfer financial instruments do not constitute a reportable transaction.

How will FinFrag Article 39 affect you?

Key points at a glance

  • Determine if you are subject to the reporting obligation: The reporting obligation is based on 3 criteria: the financial instrument, the trading venue and the securities dealer’s domicile. The principles are summarised in the below workflow (source: SIX Reporting Guide).  
  • From a reporting infrastructure perspective, ensure you provide the transaction reporting in the required format and that you  have the necessary connectivity arrangement in place:
    • Transaction Reporting in Swiss Format or European Union format as specified in the regulatory technical standards (RTS 22) can be fulfilled by using the Transaction Reporting Interface (TRI) of SIX Swiss Exchange. Foreign securities dealers subject to the reporting obligation may report transactions executed outside Switzerland in reportable financial instruments to a foreign reporting office (Approved Reporting Mechanism - ARM) recognised by SIX Swiss Exchange.
    • Ensure you have a valid LEI: Securities dealers subject to the reporting obligation using the RTS 22 standard must be in possession of a valid Legal Entity Identifier (LEI) conformant to ISO 17442:2012. The LEI needs to be communicated to and agreed with the Reporting Office prior to commencing transaction reporting with the RTS interface.

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

How can UnaVista help

UnaVista can help firms report for FinFrag Article 39, for more details please check out product page.

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