Moscow Exchange's initiatives regarding the implementation of MiFID II/MiFIR
The European Union's updated Markets in Financial Instruments Directive and the associated Regulation, typically referred to as MiFID II, comes into effect on 3 January 2018. MiFID II brings with it new requirements for pre/post-trade and reporting transparency for EU trading venues and investment firms.
Although Moscow Exchange is neither an EU trading venue (MTF/OTF) nor a regulated market under MiFID II, Moscow Exchange intends to be recognized by ESMA as a third-country trading venue. The Exchange has therefore taken the following steps to comply with certain specific MiFID II/MiFIR requirements:
- Transaction and Trade Reporting:
- Providing investment firms with trading and order reports covering their and their clients' market activity, including rejected and removed orders – all information is provided through on-line gateways (FIX, including Drop Copy service, native APIs and terminals) and end-of-day reports.
- Venue of execution – Moscow Exchange's ISO 10383 MIC codes are MISX (for the FX and Securities Markets) and RTSX (for the Derivatives Market). The operating MIC code is MISX for all markets.
- Passive/aggressive orders – Moscow Exchange classifies all orders and can identify them by their classification.
- MIFID II also requires the use of an ISIN, except for instruments for which an ISIN is not available. ISINs are available from online gateways, reports and on the website (if applicable), for example. Derivatives traded on MOEX do not have ISINs. ESMA has confirmed that the MiFID post-trade transparency requirements will only apply where the instrument is available for trading on an EU trading venue; in such cases where the derivative will already have an ISIN. For all other derivatives not available for trading on an EU trading venue there is no need to assign ISINs.
- Timestamping – Moscow Exchange provides microsecond accuracy timestamping on all markets – the Spectra trading platform was updated in February 2017.
- Clock sync – Moscow Exchange will improve its clock synchronization according to MIFID II requirements, with the maximum divergence from UTC time not exceeding 100 microseconds. More info.
- Pre-Trade Control
All trading on Moscow Exchange is subject to pre-trade collateral based risk checking, i.e., all orders are routed through MOEX risk control systems, whether or not they are already routed through brokers' risk-control systems. In addition, Moscow Exchange offers Sponsored Access service with additional risk layers:
- price collars;
- maximum order values;
- maximum order volumes;
- maximum messages limits;
- list of available instruments and trading modes;
- maximum position in a certain instrument.
More information can be found here.
- Trade and Post-Trade Control
Moscow Exchange carries out periodic stress tests (link to 2016 report), accounts for any material changes to production systems/algorithms and guarantees access to the following post-trade functionality:
- Cancel On Disconnect
- Cancel On Drop-Copy Disconnect (under Sponsored Access service)
- Post-Trade Drop-Copy
- Kill Switch functionality
All order and trade data logs are recorded, stored and provided to participants via an online gateway, daily reports and upon request.
- Software Testing and Certification
- Venue testing environments (including real-time and preventative) to ensure resilience/stability – MOEX testing (UAT) environment emulates the production – with the same SMA functionality, kill switches, instruments, parameters etc., as well as planned changes to the systems – available on both the production-like testing environment and game servers
- Certification aims to detect technical errors of a connection implementation to minimize possible damage to the trading system and/or other Member Firms and their Clients that may arise from malfunctioning off-site systems. Certification is a mandatory procedure to connect software to the Exchange's trading facility. To certify software, a customer must gain access to the test environment of the relevant market. More information on client software certification procedure can be found here.
A full guide to MOEX's certification process
THIS INFORMATION SHOULD NOT BE CONSIDERED TO BE A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN A PARTICULAR REGULATION. PARTIES OR ANY THIRD PARTIES SHOULD THEREFORE CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO ENGAGING INTO ANY CONTRACTUAL ARRANGEMENTS OR ESTABLISHING THE REQUIRED PROCEDURES. MOEX ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR ANY DEFINITION OR PROVISION CONTAINED THEREIN MAY BE PUT.BY THIS INFORMATION NO REPRESENTAIONS HAVE BEEN MADE OF ANY ADVICE GIVEN. ANY STATEMENT HEREOF CAN NOT BE USED AS A BASIS FOR RELYING ON IN RELATIONSHIP WITH MOEX UNLESS OTHERWISE EXPRESSLY PROVIDED BY RELEVANT CONTRACT.