What is FIRDS?
Financial Instruments Reference Data System (‘FIRDS’) is a data collection infrastructure established by the European Securities and Markets Authority (ESMA), in cooperation with the EU competent national authorities (NCAs), in order to collect data in an efficient and harmonised manner.
FIRDS will need to cover the entire range of financial instruments that are included in the increased scope of MiFID II.
In accomplishing this task, FIRDS will necessitate linking of data feeds between ESMA, NCAs and around 300 trading venues across the European Union.
The new framework introduced by Regulation (EU) No 600/2014 and Directive 2014/65/EU requires trading venues and systematic internalisers to provide competent authorities with financial instrument reference data that describe – in a uniform manner – the characteristics of every financial instrument subject to that Directive.
Those data are also used for other purposes, for instance for the calculation of transparency and liquidity thresholds as well as for positions reporting of commodity derivatives.
As I hope you will have heard by now, ESMA will provide a central facility in relation to reference and trading data and the calculation of the comprehensive MiFIR transparency parameters. This project has been made possible by the delegation of these tasks by national competent authorities to ESMA and it is the first time that such comprehensive tasks have been delegated to a European Supervisory Authority. Work on this major project, which requires ESMA to connect to hundreds of trading venues across Europe, is on track and is planned to go live in time with the application of MiFID in 2018. This project will allow us to collect data in a more efficient and harmonised manner across Europe, thereby achieving important economies of scale and lowering costs for industry and taxpayers, and publish all transparency parameters and reference data on financial instruments in a one-stop shop.
In order to collect data in an efficient and harmonised manner, a new data collection infrastructure is being developed.
The absence of the data collection infrastructures has implications across the entire scope of Regulation (EU) No 600/2014 and Directive 2014/65/EU.
FIRDS will be used, among others, for:
- Without data it will not be feasible to establish a precise delineation of financial instruments that fall within the scope of the new framework.
- It will not be possible to tailor the pre-trade and post-trade transparency rules, in order to determine which instruments are liquid and when waivers or deferred publication should be granted.
- Absent the data, trading venues and investment firms will not be able to report executed transactions to competent authorities.
- In the absence of position reporting for commodity derivatives it will be difficult to enforce position limits on such contracts.
- With no position reporting, there is a limited ability to effectively detect breaches of the positon limits.
- Many of the requirements in relation to algorithmic trading are also dependent on data.
- The absence of data collection infrastructures will also make it difficult for investment firms to apply best execution rules.