Exclusive Online Only ContentXtrakter Wins FSA Approval for Derivative Reporting in Alternative ID Codes
February 1, 2010
Xtrakter, the London-based trade matching and reporting firm owned by Euroclear SA, has received approval from the U.K.’s Financial Services Authority as a reporting mechanism for exchange-traded derivatives which use Alternative Instrument Identifiers (Aiis).
Alternative Instrument Identifiers (Aiis) are alphanumeric codes used by regulators across Europe to index derivatives data, when the relevant securities do not already have a 12-digit alphanumeric International Securities Identification Number (ISIN) assigned to them.
Unlike ISINs, the Aii code is not issued by a national numbering agency. It is compiled from six data fields contained within the transaction reports transmitted by financial firms and the related product codes given to the securities by their relevant exchanges.Aiis include data confirming where the derivative was traded, the product code assigned to the derivative; the type of derivative; whether it is a put or call; the maturity date and the strike price.
The new accreditation from the FSA makes Xtrakter one of two firms to have received an endorsement from the U.K.’s securities watchdog, Financial Services Authority. The other is a unit owned by the FSA itself. Euroclear, SA, the Brussels-based parent of international securities depository Euroclear Bank, and several national European securities depositories, purchased Xtrakter from the International Capital Markets Association in December 2007.
Xtrakter will send transaction reports to the FSA through its Trax regulatory reporting service for exchange traded derivative contracts with Aiis executed on the Athens Exchange derivatives market; Euronext Amsterdam; Euronext Lisbon; Euronext Paris; Eurex; Liffe and Liffe Brussels.
“Xtrakter faced a number of challenges in delivering this new service, the most significant was the provision for the Aii codes for validation within our existing reporting hub,” says Chad Giussani, product manager for Trax and information services at Xtrakter. “Exchange traded derivatives change frequently and new derivatives instruments are created daily so there is a complex process for the capturing of related data to generate a transaction report.”
The European Markets in Financial Instruments Directive (MiFID), adopted by European Union member countries in November 2007, requires that buy- and sell-side firms forward transaction reports to regulators--in their home market or elsewhere--for bonds and exchange-listed equities and derivatives within a day of the time the trade was executed. The reports, which are more detailed versions of intraday trade reports, must include not only an identification code of the security or financial contract involved, but also a description of the transaction, where it was traded and the firm trading it.
Firms can send the reports to regulators directly, through the trading venue, or through an accredited organization. Among those named by the FSA as approved reporting mechanisms in addition to Xtrakter are Omgeo, CrestCo, now called Euroclear U.K. & Ireland, the London Stock Exchange, and Credit Suisse Securities. Currently, Xtrakter processes approximately 3 million regulatory transaction reports daily on behalf of its users.
While the Committee of European Securities Regulators (CESR) initiallyfavored the use of only ISINs to identify derivative contracts, in 2008 it bowed to a request by the Federation of European Securities Exchanges (FESE) to also allow for the use of Aiis. CESR delayed the requirement for firms to report exchange traded derivatives using Aiis until 2008 to allow firms sufficient time to prepare.
