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Mitigating the impact of MiFID II on the post-trade process

The Markets in Financial Instruments Directive (MiFID II), which came into effect on 3 January 2018, has altered post-trade activities for a range of financial market participants. Firms must now adapt their middle- and back-office activities to comply with the changes required to post-trade processing. 

Understanding the impact on the post–trade process

MiFID II affects several key areas of the post-trade process. DTCC is also working across these areas to minimize client impact.

The adoption of LEI

MiFID II introduces the concept of ‘no LEI, no trade’. From 3 July 2018, investment management firms subject to MiFID II transaction reporting obligations should not execute a trade on behalf of their clients who are eligible for a Legal Entity Identifier (LEI) and do not have one. MiFID II requires parties involved in all financial instrument transactions to include the entity’s LEI when reporting to the competent authority.

Additionally, MiFID II mandates dual-sided reporting and therefore requires investment managers to report, for the first time, equity and fixed-income trades. The regulation covers issuers, investment firms and their clients, participants of trading venues and their clients, as well as brokers. Brokers will need to include the investment manager’s LEI in their reporting and investment managers must include an LEI for their underlying clients.

The GMEI utility, owned and operating by Business Entity Data (BED) B.V., a wholly owned subsidiary of DTCC is the largest Global LEI Foundation (GLEIF)-accredited Local Operating Unit (LOU) that provides LEI registrations, renewals and other services to firms involved in financial transactions globally, thereby helping them to meet their MiFID II transaction reporting obligations.

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The ALERT platform contains a field to allow Investment firms to add the LEI of their clients and share this with their broker counterparts. The LEI can also be enriched to CTM to help with reporting obligations.

To find out more about ALERT, visit

Unbundling of research costs

MiFID II enforces the unbundling and transparency of payment for sell-side research. Payments using execution commission are defined as an inducement and are prohibited. MIFID II therefore enforces strict separation between payment for research and payment of execution commission. Investment managers are required to actively manage research budgets using a Research Payment Account (RPA) or use their own P&L to pay for research.

CTM will add a new commission type for research costs to support the population of both a discrete segregated research amount as well as an execution commission amount.

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Get in to touch today to learn more about how we can help you to meet your MiFID II requirements.