• Doing business with the FSA
  • Being regulated
    • Reporting requirements
      • Transaction reporting
        • Our role
        • Managing Transaction Reporting
        • Approved Reporting Mechanisms (ARMs)
        • Regulated markets and MTFs
        • Transaction Reporting System (TRS)
        • Transaction reporting library
        • FAQs for Portfolio managers

Here, we update the industry on the Alternative Instrument Identifier (AII) project and the requirement for firms to provide the FSA with derivative transaction reports transacted on markets which use the AII.

Background

Since the Markets in Financial Instruments Directive (MiFID) was introduced, firms have been required to submit defined transaction reports to a Competent Authority. So, since November 2007 we have been capturing transactions from the industry with an ISIN (International Securities Identification Number) and Over­the­Counter (OTC) transactions through Approved Reporting Mechanisms (ARMs).

While ISIN codes are recognised as the international standard for identifying securities, there are problems when ISIN codes are used to identify derivatives on certain markets. As a result, the Committee of European Securities Regulators (CESR) decided that in addition to ISIN codes, AII codes would be introduced as a way of identifying transactions in derivatives on certain markets.

The Alternative Instrument Identifier

As CESR stipulated in its paper CESR/07­627b, the AII code will be composed of six mandatory elements:

• Exchange Code – Four character ISO 10383 MIC code of the regulated market that admits the derivative to trading.
• Exchange Product Code –Code maintained by the derivative exchanges. It is between one and 12 characters long and is uniquely associated with a particular underlying instrument and settlement type, and other characteristics of the contract.
• Derivative Type – Single character field identifying whether the instrument is an option or a future.
• Put/Call Identifier – Single character field identifying whether the derivative is a Put or a Call Option.
• Expiry/Delivery/Prompt Date – Exercise date/maturity date of a derivative contract. ISO 8601 YYYY-MM-DD standard.
• Strike Price – The strike price of an option or other financial instrument. There is no strike price for futures.

Many of these elements already form part of the existing ISIN reporting; the key addition being the Exchange Product Code.

AII update – September 2008

We have now finalised our ‘AII Transaction Reporting Technical Specification’ outlining the detailed reporting requirements of the Industry and have issued it to Approved Reporting Mechanisms (ARMs). The reportable elements and suggested validation is below. Firms will be required to report these elements to the FSA in the form of transaction reports via their member ARM. Each ARM will have its own reporting specifications that member firms must conform to in order to submit their transaction reports.

The key objectives of the AII project are to:

• Meet obligations set out under MiFID for reporting all on­exchange derivative transactions.
• Receive and process all on-exchange derivative transaction reports in an efficient and secure manner.
• Have the reference data to both route transaction reports to the relevant Competent Authority according to the criteria mandated by MiFID and to fully understand the reports we receive. The reference data will also enable us to validate transaction reports so that we do not create false AII codes.

AII transaction reporting elements, definition and suggested validation

Firms must submit the following elements to the FSA in the form of AII Transaction Reports via their member ARM:

Field Name	Definition	Validation
Reporting Firm Identification	Identifier for firm reporting the trade.	Must be a valid ISO9362 BIC or FSA Code (FRN).
Trading Date	Date on which the trade was executed.	Must be valid Date in format YYYY-MM-DD, must not be in the future.
Trading Time	Time at which the trade was executed.	Must be valid Time in format hh:mm:ss (must be UK local time).
Buy/Sell Indicator	Identifies whether the transaction was a buy or a sell from the perspective of the reporting firm.	Must be B or S. B=Buy S=Sell
Trading Capacity	Identifies the trading capacity of the firm reporting the transaction.	Must be P, A, C or X. P=Principal, A=Agency, C=Principal Cross, X=Agency Cross
Instrument Identification*	AII Exchange Product Code. Code maintained by derivative exchange	Must be valid AII Exchange Product Code between one and 12 characters in length.
Instrument Identifier Type	Single character identifier to show the identification coding used in the Instrument Identification field.	A = AII Instrument Code.
Mature/Exercise/Delivery*	Exercise/Maturity date of derivative contract.	Must be valid date in format YYYY-MM-DD. Date must be a later date than the trading date.
Derivative Type*	Identifies if the derivative instrument is a Future or an Option.	Must be F (Future) or O (Option).
Put/Call Indicator*	Identifies if the Option is a Put or a Call.	Must be P (Put), C (Call) or space filled if Derivative type = F.
Strike Price*	The strike price for the Option.	Must be valid numeric, up to 19 numeric characters, last five digits represent decimal places. Must be stated in major currency (ie in Euros not Cents).Must be zero if Derivative is a Future. Must be greater than zero if derivative is an Option.
Unit Price	The currency value of the trade/contract. (Not the tick value).	Must be valid numeric, up to 19 numeric characters, last five digits represent decimal places. Must be stated in major currency, (ie in Euros not Cents). Must not be negative.
Price Notation	ISO4172 currency code in which the Unit price and Strike price are expressed.	Must be valid ISO currency code (legacy EEA currencies may also be allowed in some circumstances).
Quantity	The number of derivative contracts included in the transaction.	Must be valid numeric, up to 19 numeric characters, last five digits represent decimal places. Must be greater than zero.
Counterparty Code	The counterparty in the transaction.	Must be a Valid BIC code, FRN code or Firms Internal Code. Mandatory where trading capacity is P, C or X.
Venue Identification*	AII Exchange Code of the regulated market that admits the derivative to trading.	Must be valid ISO 10383 MIC code of Authorised AII Market
Transaction Reference Number	Unique identification number for the transaction.	Must be non-blank. Should uniquely identify the transaction report to the reporting firm.
Report Status	Code to show if report is new, an update to an existing report, or a cancellation of an existing report.	Must be N (New), U (Update) or C (Cancel).
Counterparty 2/Client Code	The client in the transaction.	Must be a Valid BIC code, FRN code or Firms Internal Code. Mandatory where trading capacity is A, C or X.
Venue Identification Type Code#	Code to show the coding system used for the AII Exchange Code Field.	Must be M (MIC).
Unit Price Type Code#	Code to show how the unit price is expressed.	Must be C (Currency Value).

* Indicates component of AII Instrument Identification.

# New/alternative field for AII Transaction reporting, compared to existing ISIN Transaction Reporting.

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Timeline for AII in the UK

The high-level milestones for the AII project are as follows:

• AII Technical Specification Issued to ARMs – August 2008 – Complete;
• industry/ARM Development Window – August 2008 to January 2009;
• anticipated Industry/ARM Testing Window – January to February 2009;
• Go live – end Q1 2009;
• post go–live support.

Next steps

If you have any questions on AII, direct these to your member ARM, who will forward those they cannot answer onto our team here.

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