MiFIR

On 3 January 2018, a new Directive 2014/65/EC (“MiFID II”) and Regulation (EU) No 600/2014 (“MiFIR”) became effective, introducing significant changes to the transaction reporting (“MiFIR Transaction Reporting”) framework that was created in 2007 with the Markets in Financial Instrument Directive (“MiFID I”).

Interactive Brokers has implemented a new transaction reporting system that will enable clients that have direct reporting obligations under the new Regulation to comply with the new MiFIR requirements.

MiFIR Transaction Reporting applies to European Economic Area (“EEA”) and United Kingdom ("UK") Investment Firms ("Investment Firms") and also to Investment Firms that use a broker within the IB Group ("IB Group") to execute orders. As a client of an Investment Firm that uses the IB platform, you may be required to provide additional information to allow the proper transaction reports to be filed.

Investment Firms are obliged to report complete and accurate details of transactions executed in financial instruments covered by MiFIR to the relevant National Competent Authority (“NCA”) no later than the close of the next working day.

MiFIR has widened the scope of reportable financial instruments to cover those that are traded on EEA/UK Regulated Exchanges, Multilateral Trading Facilities (“MTFs”) and Organised Trading Facilities (“OTFs”). In addition to transactions executed on EEA/UK exchanges, MiFIR will capture Over the Counter (“OTC”) transactions and transactions of EEA/UK listed financial instruments that are executed on non-EEA/UK trading venues, e.g., a stock listed on the LSE traded on NYSE. (see financial instruments covered by MiFIR).

IB clients that have confirmed that they are an Investment Firm subject to MiFIR transaction reporting obligations will be offered the option to delegate their reporting obligations to their relevant IB Broker.

Some transactions executed by these Investment Firms will be reported under “Enriched Reporting” obligations. For these trades the IB Broker will add details about the Investment Firm to its own reports, satisfying the reporting obligations of the Investment Firm. Other transactions will only be reported on behalf of Investment Firms on a delegated basis, as separate reports in addition to the IB Broker's own reports. Clients will only need to sign one agreement with their IB Broker to cover both types of reporting.

The reporting fields increased from 23 under the MiFID I regime to 65 under MIFIR. The new information requirements now include, among other items:

• Detailed identification of the buyer and the seller for each transaction. In particular, the Regulation requires the provision of Legal Entity Identifiers (“LEI”) for legal entities and National Identifiers for natural persons (based on their countries of citizenship).

• Identification of the Decision Maker for the buyer and the seller when a third-party exercises discretion:

  • A person other than the account holder on an individual or joint account, or a third-party entity.

  • A third-party other than the authorized traders on the account for an organization account (e.g. a Financial Advisor trading for its clients’ sub accounts).

    This information is not required where the account holder is self-trading or where authorize traders are trading for their own organization.

• This information is not required where the account holder is self-trading or where authorized traders are trading for their own organization.

• Identification of the person or algorithm that is responsible at the reporting firm for making the investment decision or for the execution of a transaction. This information is required for EEA Investment Firms that use our reporting services.

• For Commodity Derivatives Transactions, an indication as to whether such Commodity Derivatives Transactions reduce risk in an objectively measurable way in accordance with Article 57 of MiFID II; This is applicable to organisation accounts only when the holder is a non-financial entity.

The new information affects IBKR's clients in different ways depending on whether the client is an EEA Investment Firm, or an organization or person that is not an Investment Firm, and also depending on whether the financial instruments being traded are received and/or transmitted by their IB Broker or another Interactive Brokers Group affiliate.

In order to meet its own reporting obligations, each IB Broker is obliged to identify and report its immediate client for each transaction executed. The reporting must contain the new client identifiers mandated by the Regulations.

Therefore, each IB Broker will need to obtain and report a client identifier for:

• The IB Broker's direct clients that hold an account to trade financial instruments received and/or transmitted by the IB Broker;

• Clients that are EEA Investment Firms and utilise the Interactive Brokers reporting services;

• Clients that are subaccounts of an EEA Investment Firm that uses the Interactive Brokers platform and utilises our reporting services.