Conflicts of interest
1. An APA or ARM shall operate and maintain effective administrative arrangements, designed to prevent conflicts of interest with clients using its services to meet their regulatory obligations and other entities purchasing data from the APA or ARM. Such arrangements shall include policies and procedures for identifying, managing and disclosing existing and potential conflicts of interest and shall contain:
(a)
an inventory of existing and potential conflicts of interest, setting out their description, identification, prevention, management and disclosure;
(b)
the separation of duties and business functions within the APA or ARM including:
(i)
measures to prevent or control the exchange of information where a risk of conflicts of interest may arise;
(ii)
the separate supervision of relevant persons whose main functions involve interests that are potentially in conflict with those of a client;
(c)
a description of the fee policy for determining fees charged by the APA or ARM and undertakings to which the APA or ARM has close links;
(d)
a description of the remuneration policy for the members of the management body and senior management;
(e)
the rules regarding the acceptance of money, gifts or favours by staff of the APA or ARM and its management body.
2. The inventory of conflicts of interest as referred to in paragraph 1, point (a) shall include conflicts of interest arising from situations where the APA or ARM:
(a)
may realise a financial gain or avoid a financial loss, to the detriment of a client;
(b)
may have an interest in the outcome of a service provided to a client, which is distinct from the client’s interest in that outcome;
(c)
may have an incentive to prioritise its own interests or the interest of another client or group of clients rather than the interests of a client to whom the service is provided;
(d)
receives or may receive from any person other than a client, in relation to the service provided to a client, an incentive in the form of money, goods or services, other than commission or fees received for the service.
Organisational requirements regarding outsourcing
1. An APA or ARM that arranges for activities to be performed on its behalf by third-party service providers, including undertakings with which it has close links, shall ensure that the third-party service provider has the ability and the capacity to perform those activities reliably and professionally.
An APA or ARM shall specify which of the activities are to be outsourced, including a specification of the level of human and technical resources needed to carry out each of those activities.
2. An APA or ARM that outsources activities shall ensure that the outsourcing does not reduce its ability or power to perform senior management or management body functions.
3. An APA or ARM shall remain responsible for any outsourced activity and shall adopt organisational measures to ensure:
(a)
that it assesses whether the third-party service provider carries out outsourced activities effectively and in compliance with applicable laws and regulatory requirements and adequately addresses identified failures;
(b)
the identification of the risks in relation to outsourced activities and adequate periodic monitoring;
(c)
adequate control procedures with respect to outsourced activities, including effectively supervising the activities and their risks within the APA or ARM;
(d)
adequate business continuity of outsourced activities.
For the purposes of point (d), the APA or ARM shall obtain information on the business continuity arrangements of the third-party service provider, assess its quality and, where needed, request improvements.
4. An APA or ARM shall ensure that the third-party service provider cooperates with ESMA or, where relevant, the national competent authority, in connection with outsourced activities.
5. Where an APA or ARM outsources a critical or important function, it shall provide ESMA or, where relevant, the national competent authority with:
(a)
the identification of the third-party service provider;
(b)
the organisational measures with respect to outsourcing and the risks posed by it as specified in paragraph 3;
(c)
internal or external reports on the outsourced activities.
Management of incomplete or potentially erroneous information by APAs
1. APAs shall set up and maintain appropriate arrangements to ensure that they accurately publish the trade reports received from investment firms without themselves introducing any errors or omitting information and shall correct information where they have themselves caused the error or omission.
2. APAs shall continuously monitor in real-time the performance of their IT systems ensuring that the trade reports they have received have been successfully published.
3. APAs shall perform periodic reconciliations between the trade reports they receive and the trade reports that they publish, verifying the correct publication of the information.
4. An APA shall confirm the receipt of a trade report to the reporting investment firm, including the transaction identification code assigned by the APA. An APA shall refer to the transaction identification code in any subsequent communication with the reporting firm in relation to a specific trade report.
5. An APA shall set up and maintain appropriate arrangements to identify on receipt trade reports that are incomplete or contain information that is likely to be erroneous. These arrangements shall include automated price and volume alerts, taking into account:
(a)
the sector and the segment in which the financial instrument is traded;
(b)
liquidity levels, including historical trading levels;
(c)
appropriate price and volume benchmarks;
(d)
if needed, other parameters according to the characteristics of the financial instrument.
6. Where an APA determines that a trade report it receives is incomplete or contains information that is likely to be erroneous, it shall not publish that trade report and shall promptly alert the investment firm submitting that trade report.
7. In exceptional circumstances APAs shall delete and amend information in a trade report upon request from the entity providing the information when that entity cannot delete or amend its own information for technical reasons.
8. APAs shall publish non-discretionary policies on information cancellation and amendments in trade reports which set out the penalties that APAs may impose on investment firms providing trade reports where the incomplete or erroneous information has led to the cancellation or amendment of trade reports.
Management of incomplete or potentially erroneous information by ARMs
1. An ARM shall set up and maintain appropriate arrangements to identify transaction reports that are incomplete or contain obvious errors caused by clients. An ARM shall perform validation of the transaction reports against the requirements established under Article 26 of Regulation (EU) No 600/2014 for field, format and content of fields in accordance with Table 1 of Annex I to Commission Delegated Regulation (EU) 2017/590 ( 10 ) .
2. An ARM shall set up and maintain appropriate arrangements to identify transaction reports which contain errors or omissions caused by that ARM itself and to correct, including deleting or amending, such errors or omissions. An ARM shall perform validation for field, format and content of fields in accordance with Table 2 of Annex I to Delegated Regulation (EU) 2017/590.
3. An ARM shall continuously monitor in real-time the performance of its systems ensuring that a transaction report it has received has been successfully reported to the competent authority in accordance with Article 26 of Regulation (EU) No 600/2014.
4. An ARM shall perform periodic reconciliations at the request of ESMA or, where relevant, the national competent authority, or the competent authority to whom the ARM submits transaction reports, between the information that the ARM receives from its client or generates on the client’s behalf for transaction reporting purposes and data samples of the information provided by the competent authority.
5. Any corrections, including cancellations or amendments of transaction reports, that are not correcting errors or omissions caused by an ARM, shall only be made at the request of a client and per transaction report. Where an ARM cancels or amends a transaction report at the request of a client, it shall provide this updated transaction report to the client.
6. Where an ARM, before submitting the transaction report, identifies an error or omission caused by a client, it shall not submit that transaction report and shall promptly notify the investment firm of the details of the error or omission to enable the client to submit a corrected set of information.
7. Where an ARM becomes aware of errors or omissions caused by the ARM itself, it shall promptly submit a correct and complete report.
8. An ARM shall promptly notify the client of the details of the error or omission and provide an updated transaction report to the client. An ARM shall also promptly notify ESMA or, where relevant, the national competent authority, and the competent authority to whom the ARM submitted the transaction report about the error or omission.
9. The requirement to correct or cancel erroneous transaction reports or report omitted transactions shall not extend to errors or omissions which occurred more than five years before the date that the ARM became aware of such errors or omissions.
Connectivity of ARMs
1. An ARM shall have in place policies, arrangements and technical capabilities to comply with the technical specification for the submission of transaction reports required by ESMA or, where relevant, the national competent authority and by other competent authorities to whom the ARM sends transaction reports.
2. An ARM shall have in place adequate policies, arrangements and technical capabilities to receive transaction reports from clients and to transmit information back to clients. The ARM shall provide the client with a copy of the transaction report which the ARM submitted to the competent authority on the client’s behalf.
Machine readability requirements for APAs
1. APAs shall publish information in accordance with Article 27g(1) of Regulation (EU) No 600/2014 in a machine readable way.
2. Information shall only be considered published in a machine-readable way where all of the following conditions are met:
(a)
it is in a file format structured so that software applications can easily identify, recognise and extract specific data;
(b)
it is stored in an appropriate IT architecture that enables automatic access;
(c)
it is robust enough to ensure continuity and regularity in the performance of the services provided and ensures adequate access in terms of speed;
(d)
it can be accessed, read, used and copied by computer software that is free of charge and publicly available.
For the purposes of point (a) of the first subparagraph, the file format shall be specified by free, non-proprietary and open standards. The file format shall include the type of files or messages, the rules to identify them, and the name and data type of the fields they contain.
3. APAs shall:
(a)
make instructions available to the public, explaining how and where to easily access and use the data, including identification of the file format;
(b)
make public any changes to the instructions referred to in point (a) at least three months before they come into effect, unless there is an urgent and duly justified need for changes in instructions to take effect more quickly;
(c)
include a link to the instructions referred to in point (a) on the homepage of their website.
Details of transactions to be published by APAs
An APA shall make public:
(a)
for transactions executed in respect of shares, depositary receipts, exchange-traded funds (ETFs), certificates and other similar financial instruments, the details of a transaction specified in Table 3 of Annex I to Commission Delegated Regulation (EU) 2017/587 ( 11 ) and, use the appropriate flags listed in Table 4 of Annex I to Delegated Regulation (EU) 2017/587;
(b)
for transactions executed in respect of bonds, structured finance products, emission allowances and derivatives the details of a transaction specified in Table 2 of Annex II to Commission Delegated Regulation (EU) 2017/583 ( 12 ) and use the appropriate flags listed in Table 3 of Annex II to Delegated Regulation (EU) 2017/583.
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
