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FAQs on transaction reporting – Question II.2.1.1

Data Field (1) and (8)

Some market participants place orders on screen on behalf of more than one legal entity.

For example, a trading house may has a US head office and a European subsidiary and they enter into master agreements with various trading counterparties with either the US head office or the European registered entity, depending upon the preference of the counterparty. US entities would for example contract with the US parent for example to be governed by US law whereas European entities would typically contract with the European based subsidiary.

A trader at one of these “double headed” companies places a single order onto the market. For every counterparty that has good credit with them the number appears tradable, but the resulting trade can end up as being between one of several entities. So a single order can result in a trade with a different “principal” depending on who the counterparty name is. The order is in effect placed on behalf of two (or more) legal entities. I can’t see a way in the schema of representing this.

Example – trader at DoubleCo that has 2 entities – Usco and EUco.

With counterparty A they have a master agreement between A and USco.

With counterparty B they have a master agreement between A and EUco.

DoubleCo initiates an order onto the market, and depending on whether it is aggressed by A or B determines whether there is a trade between USCo and A, or EUCo and B.

The difficulty is how to represent the single order that is on behalf of more than one entity.

USCo is not acting as an agent for EUCo, both USCo and EUCo would be principals to the trade. Company A would report a trade with USCo and company B would report a trade with EUco.

The suggestion would be that ACER accepts that for certain participants, that the idOfMarketParticipant reported for the order may not match the idOfMarketParticipant reported on the linked trade.

An alternative would be to update the schema to allow more than one participant ID on an order (but not on a trade, since we know the correct legal entity at this point).


Answer:

When market participants place orders to trade on broker platforms on behalf of more than one legal entity the Organised Market Place should decide or/and agree with their clients which market participant is placing the order for the reporting purpose. By placing an order the legal entity is a market participant even if it will not be a counterparty to the trade.

Data Field (1) ID of the market participant or counterparty, requires that the ID of the market participant or counterparty on whose behalf the record of transaction is reported shall be identified by a unique code.

In the Agency’s view, this means that market participants that place orders on the screen of the brokers or exchanges have to be identified in the trade report as responsible for the reporting of the report. This does not imply that they are counterparty to the contract, but that they are responsible for the reporting of the order or the trade.

When a single order can result in a trade with a different “principal” depending on who the counterparty name is and the order is still placed on behalf of two (or more) legal entities, there is no need to indicate in the order report who is the beneficiary if and only if the beneficiary may be either the USco and EUco (as for the example above).

With regard to the trade, once it is clear to the Organised Market Place (and the market participant who placed the order) who is the beneficiary of the trade, this can be added in field (8) “Beneficiary ID” if this is different than the market participant reported in Field (1) “ID of the market participant or counterparty” in the order report. Please see the example below.

Firms Placing the order

(any of the three legal entities e.g. EUCo)

Matched orders Other side of the trade
EUCo EUCo and MP 1 MP 1
USCo EUco USCo and MP 2 MP 2
JPCo JPCo and MP 3 MP 3

 

The trade report should look like:

 Field # Case 1

EUCo and MP1

Case 2

EUCo and MP1

(alternative to case 1)

Case 3

USCo and MP2

Case 4

JPCo and MP3

#1 (ID MP) EUCo EUCo EUCo EUCo
# 4 (ID Other MP) MP 1 MP 1 MP 2 MP 3
# 8 (Beneficiary ID) EUCo USCo JPCo
#10 (Capacity) P A A A

 

Last update: 08/09/2015   RSS_Icon Subscribe to this Page’s RSS