Banks Leading the Industry into a New Regulatory Era as MiFID II Looms

The data is provided by the London-headquartered Derivatives Service Bureau.

As the implementation date of the new regulatory rules in the European Union is fast approaching, financial institutions are gearing up for the upcoming changes. According to data provided a global industry body, the Association of National Numbering Agencies (ANNA), banks are leading the way in preparing for the new MiFID II framework.

The ANNA is the global body that is governing national numbering agencies. Its London-headquartered Derivatives Service Bureau (DSB) is a global numbering agency that is keeping track of over-the-counter (OTC) derivatives.

The DSB issues the International Securities Identification Numbers (ISIN) and classifies them.

Data from the DSB shows that as of the 7th of December, a total of 77 entities have submitted contracts in which fees are applicable. The figure is double what was reported last month.

Commenting on the news, the Managing Director of the DSB, Emma Kalliomaki, said: “In the run-up to the January deadline, our administrative and technical staff are working overtime to facilitate user contracts and expedite integrations with user systems for MiFID II readiness.”

“Not surprisingly, we have found that organizations that helped shape our policies and operations through the DSB’s industry consultations tend to have easier onboarding experiences because they are better informed and prepared,” she added.

Banks and Buy Side are Dominating in Equities, FX, and Fixed Income

The DSB outlines in its data that for fee-based contracts which have been dominated by FX and interest rates products lately, the participation of global and regional banks is higher than expected.

Major buy-side firms and smaller trading venues are also contributors, while a highly anticipated participation by larger trading venues is yet to materialize. The DSB also states that some organizations that own multiple trading venues might limit ISIN-creation activity to only some of their venues.

Amongst the institutions that have submitted their contract data, 66 are so-called ‘power users’. 5 are standard users that create ISINs via a web interface, and 6 are infrequent users that create low-volumes of ISINs via a web interface.

Basing its findings on the contract submissions received to date and information from larger trading venues, the DSB expects that fees paid by investment banks may be required to cover 60 percent of the overhead of the service, with 15 percent of costs covered by vendors and the buy-side. Larger venues could contribute 25 percent of the value.

Malavika Solanki, who is principal consultant at Etrading Software, which is the management services partner of the DSB, said: “The increased activity seen in the last month was driven by firms wishing to be in production by mid-December. However, new contracts continue to arrive and are moving through the onboarding process at a steady pace.”

An official statement by the DSB said: “Users have created more than 625,000 ISINs since the service was opened in October for on-demand ISIN generation and retrieval. The DSB’s initial adopters had focused on equity derivatives, with increasing volume of FX and interest rate products appearing in recent weeks.”

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