|Approved Publication Arrangement (APA)|
|European Union Electricity Market Glossary|
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Approved publication arrangement (APA) is a person authorised under the provisions established in the MIFID II Directive to provide the service of publishing trade reports on behalf of investment firms (Article (4)(1)(52) MiFID II).
APAs are designed to provide services to an investment firm in order for it to meet its obligations under Articles 20 and 21 MiFIR.
Article 20 of MiFIR states that, "investment firms which, either on own account or on behalf of clients, conclude transactions in shares, depositary receipts, ETFs, certificates and other similar financial instruments traded on a trading venue, shall make public the volume and price of those transactions and the time at which they were concluded. That information shall be made public through an APA".
The APA is required to have adequate policies and arrangement in place to make public the information required under Articles 20 and 21 MiFIR as close to real time as is "technically possible" on a "reasonable commercial basis" (the latter term clarified by Article 6 of the Commission Delegated Regulation (EU) 2017/567 of 18 May 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions and Articles 84-89 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive).
The information shall be made available free of charge 15 minutes after the APA has published it.
The home Member State must require the APA to be able to efficiently and consistently disseminate such information in a way that ensures fast access to the information, on a non-discriminatory basis and in a format that facilitates the consolidation of the information with similar data from other sources.
Authorisation and organisational requirements for APA's
There are separate but similar authorisation and organisational requirements for providers of data services (APAs, ARMs, and CTPs).
The rules focus on ensuring the integrity and security of the data these entities will handle.
Commission Delegated Regulation (EU) 2017/571 of 2 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the authorisation, organisational requirements and the publication of transactions for data reporting services providers specifies the data publication requirements applicable to APAs (and CTPs), and in particular:
- rules on authorisation, including the information on organisation and corporate governance;
- organisational requirements, including conflict-of-interest rules, outsourcing, and business continuity, testing and capacity, security and management of incomplete or potentially erroneous data;
- as regards provisions on publication arrangements, the provisions cover machine readability, provisions on scope of data and rules to avoid data duplication and non-discriminatory publication.
According to Article 59(3) of MiFID II ESMA is required to publish and keep up to date a list of all APAs in the European Union on its website (the register contains also data related to European Economic Area (EEA) / European Free Trade Association (EFTA) States).
The register, as visited on 9 January 2018, was populated with data regarding 4 APAs:
It is noteworthy, the European Commission proposes to transfer the powers to authorise and supervise the APAs from the national competent authorities to ESMA by introducing new Articles 27a-27h in MiFIR and deleting Articles 59-66 in MiFID II (Working document on on the proposals to amend the European System of Financial Supervisions, Committee on Economic and Monetary Affairs, 23.01.2018 (COM(2017/0536 - C8- 0319/2017 - 2017/0230(COD), COM(2017/0537 - C8-0318/2017 - 2017/0231(COD), COM(2017/0538 - C8-0317/2017 - 2017/0232(COD)).
What is the difference between APAs and ARMs? APAs are firms who make public the details of transactions in financial instruments, while ARMs stand for firms who report the details of transactions to regulators for the purposes of market abuse surveillance.
In other words, both business vehicles: APAs as well as ARMs are designed to provide services to an investment firm in order for it to meet its obligations under MiFIR, but the respective MiFIR obligations for APAs are Articles 20 and 21, whereas the purpose of ARMs is to provide services enabling reporting obligations under Article 26 MiFIR.
There are also operational differences: whereas APAs and ARMs both are required to check investment firms' submissions for errors as well as to request resubmission if there are any issues, it appears that delegation to APAs takes responsibility away from investment firms while delegation to ARM does not (see: Norton Rose, MiFID II / MiFIR: Your Survival Guide Market Structures – Tying it All Together, p. 21).
Another difference is that APAs are under the obligation to disseminate information efficiently and consistently in a way that ensures fast access on a non-discriminatory basis in a format that facilitates consolidation from other sources, while ARMs have no regulatory duties to facilitate consolidation of data from other sources.
Among the first Data Reporting Services Providers authorised by the UK FCA as from 3 January 2018 having simultaneous an APA/ARM functionalities were London Stock Exchange plc, Bloomberg Data Reporting Services Limited, Abide Financial DRSP Limited and Xtrakter Limited APA/ARM while the sole APA’s authorisation have Bats Trading Limited and Tradeweb Europe Limited.
Investment firms making public their transactions through more than one APA
Details to be published by APAs
The information made public by an APA is required to include, at least, the following details (Article 64(2) MiFID):
(a) the identifier of the financial instrument;
(b) the price at which the transaction was concluded;
(c) the volume of the transaction;
(d) the time of the transaction;
(e) the time the transaction was reported;
(f) the price notation of the transaction;
(h) if applicable, an indicator that the transaction was subject to specific conditions.
Details to be published by APAs are further specified in Article 18 of the aforementioned Commission Delegated Regulation (EU) 2017/571 of 2 June 2016.
Pursuant to the said provision an APA shall make public:
(a) for transactions executed in respect of shares, depositary receipts, ETFs, certificates and other similar financial instruments, the details of a transaction specified in Table 2 of Annex I to Commission Delegated Regulation (EU) 2017/587 of 14.7.2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internaliser and use the appropriate flags listed in Table 3 of Annex I to the said Regulation;
(b) for transactions executed in respect of bonds, structured finance products, emission allowances and derivatives the details of a transaction specified in Table 1 of Annex II to Commission Delegated Regulation (EU) 2017/583 of 14.7.2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives and use the appropriate flags listed in Table 2 of Annex II to the said Regulation.
Where publishing information on when the transaction was reported, an APA must include the date and time, up to the second, it publishes the transaction.
An APA that publishes information regarding a transaction executed on an electronic system must include the date and time, up to the millisecond, of the publication of that transaction in its trade report.
An 'electronic system' is understood in this context as a system where orders are electronically tradable or where orders are tradable outside the system provided that they are advertised through the given system.
Timestamps referred to above must, respectively, not diverge by more than one second or millisecond from the Coordinated Universal Time (UTC) issued and maintained by one of the timing centres listed in the latest Bureau International des Poids et Mesures (BIPM) Annual Report on Time Activities.
APA must ensure that the information, which has to be made public, is sent through all distribution channels at the same time, including when the information is made public as close to real time as technically possible or 15 minutes after the first publication.
Publication of transactions concluded on third country trading venues and OTC bilateral transactions concluded by EU investment firms with non-EU firm
As was said above, the post-trade transparency requirements in Articles 20 and 21 of MiFIR require EU investment firms to make information on transactions in financial instruments traded on a trading venue public through APAs, however, these provisions do not clarify whether this obligation applies also to transactions concluded on a third-country trading venue.
According to the ESMA Opinions on determining third-country trading venues for the purpose of transparency under MiFID II / MiFIR:
- of 31 May 2017 (ESMA70-154-165), and
- of 15 December 2017 (ESMA70-154-467),
third-country information made public in the European Union through an APA include:
a. OTC bilateral transactions concluded by EU investment firms with non-EU firms, and
b. transactions that are concluded on third country trading venues that are not subject to a certain level of post-trade transparency (intended to be indicated in the Annex to the said ESMA's Opinions).
The aforementioned criteria for identification of third-country trading venues, which are subject to similar post-trade transparency requirements as EU trading venues cover the following metrics:
- operating a multilateral system, i.e. a system or facility in which multiple third-party buying and selling interests in financial instruments are able to interact;
ESMA intends to publish a list of trading venues that meet the criteria stated above as well as the list of those not fulfilling the above conditions.
Both lists will be published in an Annex to the ESMA's Opinion and will be updated on an ongoing basis.
In the Opinion of 15 December 2017 (ESMA70-154-467) ESMA added that in order to contribute to the smooth implementation of MiFIDII/MiFIR as of 3 January 2018 and to maintain a level playing field between third country trading venues, transactions on third country trading venues should not be required to be made post-trade transparent under Articles 20 and 21 of MiFIR pending an ESMA assessment of more than 200 third-country trading venues and the publication of the results.
Any identification of trading venues for the purposes of the consistent application of the post-trade transparency requirements set out in MiFIR as set out above does not in any way prejudice an equivalence assessment performed by the European Commission under MiFID II/MiFIR and, in particular, any equivalence assessment of third-country trading venues for the purposes of the trading obligations for shares and derivatives, in accordance with Article 25(4)(a) of MiFID II and Article 28(4) of MiFIR.
In the Answer to Question 2 (updated on 3 October 2017, Questions and Answers on MiFID II and MiFIR transparency topics, ESMA70-872942901-35) ESMA underlined that with respect to the deferral regime applicable to OTC trades the location of the APA through which a transaction is made public is not relevant (according to the ESMA, the respective deferral regime applicable to OTC trades is determined by the deferral regime applicable in the EU Member State where the investment firm that has to make the transaction public is established).
Cancellation and amendments in trade reports
An APA is required to set up and maintain appropriate arrangements to identify on receipt trade reports that are incomplete or contain information that is likely to be erroneous.
APA's participation in the portfolio compression process
APAs are also envisioned to play a role in the portfolio compression.
It is the matter of Article 18 Commission Delegated Regulation (EU) of 18.5.2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions, which provides for some publication requirements for each portfolio compression cycle performed by investment firms and market operators.
Information to be made public through the APA (as close to real-time as is technically possible and no later than the close of the following business day after a compression proposal becomes legally binding) includes:
(a) a list of derivatives submitted for inclusion in the portfolio compression,
(b) a list of derivatives replacing the terminated derivatives,
(c) a list of derivatives changed or terminated as a result of the portfolio compression,
(d) the number of derivatives and their value expressed in terms of notional amount.
The information referred to above must be disaggregated per type of derivative and per currency.
APA's quote streaming and order execution services to systematic internalisers and their clients
In the in Questions and Answers on MiFID II and MiFIR market structures topics of 7 July 2017 (ESMA70-872942901-38) ESMA referred to a situation where APAs proposed setting up arrangements which, on top of their APA services, provide a suite of quote streaming and order execution services to systematic internalisers (SIs )and their clients (in this set-up clients could not interact with more than one SI via a single message but could send multiple messages to multiple SIs participating in the service provided).
This was in the context of Articles 14(1) and 18(1) of MIFIR, which require SIs to make public firm quotes, which may be published through an APA.
In the ESMA opinion, a system that provides quote streaming and order execution services for multiple SIs is a multilateral system and is required to seek authorisation as a regulated market, MTF or OTF in accordance with Article 1(7) of MiFID II.
Steven Maijoor, ESMA Chair, while referring to APAs on 21 June 2018 (ESMA70-156-427) said that following the application of MiFID II, ESMA was made aware of substantial increases in the costs of market data, reaching at times up to 400% compared to prices charged prior to 3 January 2018.
In addition, ESMA received complaints from stakeholders that not all trading venues and APAs publish the required information in accordance with the reasonable commercial basis principles in MiFID II.
The ESMA’s Chair has remarked that ESMA is gathering information on this issue and, should it be necessary, may provide further guidance on how those rules should be applied.
|Last Updated on Thursday, 19 July 2018 10:13|