FIX Trading Community, the non-profit, industry-driven standards body at the heart of global financial trading, has released Recommended Practices for Commission Unbundling as required by MiFID II.
MiFID II has introduced the requirement to explicitly separate commissions into their component parts (e.g. execution, research) with a focus on the specific identification of the research component of the commission. In addition, MiFID II has introduced the concept of a research-payment account (RPA). Previously, commission payments were generally handled in the background by Commission Sharing Agreements (CSA).
Over the past two years, FIX members have debated and discussed the European Securities and Markets Authority (ESMA) terminology and responded to updates across a number of different MiFID Working Groups. The FIX MiFID Commission Unbundling Working Group, in conjunction with the FIX Global Post Trade Working Group, has worked on producing a document that provides guidelines for pre-trade and post-trade representation of commission components for all asset classes, using the FIX Protocol.
Dave Tolman, Principal Services Analyst, Itiviti, Co-chair FIX Global Post Trade Working Group, noted, “The FIX Global Post Trade Working Group has worked for a number of years to facilitate industry-wide implementation of post-trade processing via FIX between buy-side and sell-side firms. This is a natural progression to address the MiFID II requirements that will affect many global firms.”
Rebecca Healey, Head of EMEA Market Structure and Strategy, Liquidnet, Co-Chair FIX EMEA Regulatory Subcommittee, commented, “It was important to have consensus across membership, as FIX has done across all MiFID Working Groups, with commission unbundling. With the assistance of thebuy-side, sell-side and vendors we have been able to produce these specific guidelines to help the market address this requirement.”
David Pearson, Head of Post-trade, Fidessa, Co-chair FIX Global Post Trade Working Group, said, “After a detailed analysis of the regulations, and extensive industry consultation, the FIX Working Group recognised that the current guidelines and message specification needed to be enhanced to allow the post-trade process to handle multiple commissions on the allocation instruction and confirmation messages. This document provides important guidelines to assist firms ahead of the January 2018 deadline.”
The Recommended Practices document can be found here.