1. Transaction Reporting Transaction Reporting – to allow the Regulator to identify market abuse and undertake market surveillance. This alerts them to potential new risks to market confidence arising from significant market developments. As opposed to: Trade Reporting – to improve market transparency and price formation

2. This MiFID-derived requirement applies to any firm that executes a transaction in any financial instrument admitted to trading on an EEA regulated market or a prescribed market (whether or not the transaction was carried out on such a market). Such reports are non-public. The FSA has super-equivalently applied the requirement to transactions in any OTC derivative, the value of which is derived from, or which is otherwise dependent upon, an equity or debt-related financial instrument admitted to trading on a regulated or prescribed market. CESR is looking to extend this OTC requirement EU-wide. Transaction Reporting (2)

3. Transaction Reporting (3) As such, the FSA expects that IMA firms should be Transaction Reporting almost all of their trades This, despite Article 45 of MiFID L2, which makes it clear that portfolio managers place orders with other entities for execution that result from decisions by the investment firm to deal in financial instruments on behalf of its client This is as opposed to execution itself, or receipt and transmission of orders, which brokers would do. … however, there is an exemption.

4. Transaction Reporting (4) If a discretionary investment manager (“DIM”) uses a UK broker then they can rely on them to Transaction Report. EEA brokers can generally be relied on. But, as the FSA is super-equivalent, a non-UK EEA broker may not report all transactions that the FSA requires. Where the exemption does not apply, then the DIM must report for itself, e.g. if the DIM uses a non-EEA broker to trade a dual listed stock, then they cannot rely on this exemption.

5. Transaction Reporting (5) So, in short, the FSA would deem that a DIM is responsible for Transaction Reporting any reportable transactions… But, if it can, reasonably, rely on another firm to report on its behalf, then it need not report for itself. All the DIM need do is check, annually, that the broker is EEA regulated, or contractually required to report. DIMs need not check with the FSA that the brokers are reporting on their behalf.

6. Is the transaction SUP 17.1.4 reportable? Are you using a broker? No Report Report 1 Are you using a UK broker? No Report Is the Financial Instrument super-equivalent? Report 2 Are you using an EEA broker? ‘Introducing broker’ Are you aware that your broker is an introducing broker? Then treat the firm to whom the trade is introduced as your broker. Go to 3rd question Then treat the first broker as your broker. Go to 3 rd question No ReportReport 3 N NY Y YN YN YN YN