MiFID II transaction reporting defines the reporting obligations defined by the European Parliament and Council for investment firms which deal in transactions in financial instruments. The principal reasons for these requirements are to detect and investigate possible market abuse, monitor that markets are operating in a fair and orderly manner and to monitor the activities of all investment firms.

The scope of the MiFID II transaction reporting requirements includes any transaction in financial instruments that are: traded on a trading venue, that consist of an underlying transaction that is traded in a trading venue or where they consist of an underlying transaction that is an index or basket composed of financial instruments that are traded on a trading venue.

MiFID II applies to investment firms (as defined in MiFID II), credit institutions that provide investment services (or perform investment activities) and market operators and the trading venues that they operate.

The reporting requirements for MiFID II came into effect on January 3, 2018. These requirements (that replaced MiFID I) cover a wider range of instruments and required additional information to be included in a report. In addition they impose new report formats and methods as well asa significant amount of additional information to what was previously required under MiFID I.

The main reporting obligation is that investment firms which deal in financial instruments must report complete and accurate details when they execute those transactions to their home competent authority as quickly and as accurately as possible (at least within a 24 hour period after execution). The reporting requirements not only require the person who executed the transaction to be identified but also whom made the financial decision of which they are the consequence. The definition of ‘execution’ of a financial instrument also has a wider meaning in the new transaction reporting context.

Overall, significant additional security, control and technological obligations apply under the updated reporting standard as well as the addition of new transaction types leading to a total of 60 types. Systems must also be in place to ensure the security and confidentiality of report data including methods or authenticating the source of the report.

Regulators can impose significant fines for reporting that is inaccurate or incomplete. Some national competent authorities that are responsible for ensuring the MiFID II requirements are met have announced that firms who breach the requirements may expect a 50% increase in the amount of a fine for each individual additional breach made within their jurisdictions.