Transaction reporting

For the purpose of the supervision of securities markets, credit institutions and investment firms incorporated under Luxembourg law and branches of third-country companies set up in Luxembourg (all three referred to below as “investment firms”) which execute transactions in financial instruments shall report complete and accurate details of such transactions to the CSSF. This transaction reporting obligation, in force since 3 January 2018, is provided by Article 26 of Regulation (EU) No 600/2014 on markets in financial instruments (MiFIR).

Following the definition of “execution of a transaction” set out under the Commission Delegated Regulation (EU) 2017/590 (RTS 22), investment firms which only act as receiver and transmitter of orders may also be subject to the transaction reporting obligation.

The obligation to report transactions applies for:

• financial instruments which are admitted to trading or traded on a trading venue or for which a request for admission to trading has been made;
• financial instruments where the underlying is a financial instrument traded on a trading venue; and
• financial instruments where the underlying is an index or a basket composed of financial instruments traded on a trading venue.

For the purposes of Article 26 of MiFIR, the notion of “transaction” is specifically defined in Article 2 of RTS 22. Thus, the conclusion of an acquisition or disposal of a financial instrument constitutes a transaction. A transaction also includes a simultaneous acquisition and disposal of a financial instrument where there is no change in the ownership of that financial instrument but post-trade publication is required.

Article 2(4) of RTS 22 lists operations that are not included in the notion of a transaction for the transaction reporting purposes. It is important to note that primary market operations are no longer exempt from the transaction reporting obligation under MiFID II/MiFIR.

Moreover, Article 3(1) of RTS 22 provides further clarification as to the meaning of “executing a transaction“. Accordingly, an investment firm shall be deemed to have executed a transaction where it provides any of the following services or performs any of the following activities that result in a transaction:

• reception and transmission of orders in relation to one or more financial instruments;
• execution of orders on behalf of clients;
• dealing on own account;
• making an investment decision in accordance with a discretionary mandate given by a client;
• transfer of financial instruments to or from accounts.

An investment firm shall not be deemed to have executed a transaction where it has transmitted an order in accordance with Article 4 of RTS 22. In order to avoid non-reporting or double reporting by investment firms that transmit orders to each other, the investment firm that intends to transmit the order should agree with the firm receiving the order whether the receiving firm will report all the details of the resulting transaction or transmit the order onwards to another investment firm.

This possibility of transmission within the meaning of Article 4 of RTS 22 is only given in cases where the receiving firm itself is subject to Article 26 MiFIR. Therefore, a transmission to an entity in a third country cannot be made.

If both entities are within the scope of Article 26 MiFIR, the CSSF recommends that these transmission agreements are documented in a formal contract in order to avoid any misunderstanding between the two parties concerned. Moreover, the details relating to the order to be transmitted between the investment firms should be specified to ensure that the competent authorities receive information that is relevant, accurate and complete.

In the absence of such an agreement, the order should be deemed not transmitted and each investment firm should submit its own transaction report containing the details of the transaction that each investment firm is deemed to have executed.

Investment firms must inform the CSSF whether or not they are subject to the transaction reporting obligation.

Entities that fall under the obligation to submit MiFIR transaction reports, whether they submit their transactions directly to the CSSF or through an approved reporting mechanism (ARM) or the trading venue through whose systems the transaction was completed, shall notify the CSSF, prior to sending the first transaction report file, by using the transaction reporting form in the “Documentation” section.

On the other hand, investment firms that are not subject to the transaction reporting obligation are asked to provide a corresponding explanation by email to transactionreporting@cssf.lu. For further details, please consult Circular CSSF 17/674.

The TAF Handbook describes the transaction reporting principles to be used by investment firms, market operators and ARMs in order to report transactions to the CSSF.

For further details, please consult the TAF Handbook in the “Documentation“section.