MIFID INSIGHTS

Transaction reporting compliance remains a paramount concern for investment firms due to MiFID II's introduction of several changes. Among these, the concept of Aggregated Client Accounts (INTC) has garnered significant attention, posing challenges for many firms. In this article, we'll explore the definition of INTC, its importance, and how Qomply supports investment firms in ensuring compliance.

What is INTC?

INTC, or Aggregated Client Account, comes into play when investment firms operating in an agency capacity execute orders involving multiple client allocations. INTC allows for the proper reporting of aggregated orders without giving the impression that the firm is dealing in principal. Typically, when executing transactions for a single client, a single report reflects both the market and client sides. However, the aggregation of orders divides these reports into two parts:

Market Side: These reports provide insight into the transaction from the market's perspective, detailing its execution with the market counterparty.

Client Allocations: These reports break down the aggregated orders into individual client allocations, specifying how the orders were distributed among different clients.

To ensure compliance with MiFID II transaction reporting guidelines when utilising INTC, it is crucial to adhere to two key rules:

Balance Equality: At the end of the day, the quantities on the market and client sides must match. In other words, there should be no remaining balance in the INTC. If 50 units were input into INTC, 50 units must be withdrawn.

Multiple clients: INTC should be used exclusively for aggregated client orders and not for single clients.

Additionally, in accordance with the guidelines, firms must report the earliest trade date and time for all client allocations when the market side of the transaction was executed in multiple fills.

Looking forward, ESMA has recognised that it can be difficult to identify which market trades match to which allocations as there is no explicit linkage between the two, other than the ISIN and trade date time. As such, it has proposed the use of a unique code in the buyer/seller fields instead of INTC. If ESMA introduces this change, although it addresses the issue, it would mean that firms would need to change their systems to generate a unique code and insert this into the relevant buyer/seller fields of the market and allocation trades.