MiFID II INTC Aggregated Client Account Reporting
Key Takeaways
- INTC Purpose: INTC allows firms to report aggregated client orders without implying principal dealing, preserving the agency nature of the execution structure.
- Balance Rule: Market-side and allocation-side quantities must reconcile fully by day end, making quantity equality a central control over INTC usage.
- Use-Case Restriction: The convention should be reserved for genuinely aggregated client orders, not transactions involving only a single client relationship.
- Timestamp Sensitivity: Where the market side executes in multiple fills, firms must report the earliest trade date and time for all allocations.
- Forward-Looking Change: ESMA's proposal to replace INTC with a unique linkage code could improve traceability but would require material system changes.
INTC is the MiFID II convention used to report aggregated client orders without implying principal trading. This guide explains how INTC works, common reporting errors, regulator expectations, and practical controls to validate allocations and reconciliations.
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.
How Can Qomply Assist?
Qomply is dedicated to helping investment firms navigate the complexities of MiFID II and ensure adherence to the guidelines concerning INTC. We offer a unique solution that includes rules to verify and validate transactions, checking for any inconsistencies related to the use of INTC. Our experience has shown that investment firms still grapple with the intricacies of INTC, making the need for a reliable and comprehensive solution even more critical.
As an example, we have observed instances where firms are reporting the same LEI in multiple "allocation" reports for the same market side transactions. This is especially an issue where a firm has several sub funds under one LEI. To assist firms in reviewing the reporting for this scenario, our tool highlights any such instances and presents it as a warning.
By leveraging Qomply ReportAssure, investment firms can effectively:
- Mitigate Compliance Risks: Our solution helps identify and rectify any non-compliance issues related to the use of INTC, reducing the risk of regulatory penalties and fines.
- Streamline Reporting: Qomply Assure streamlines the transaction reporting process, making it more efficient and accurate, ensuring that aggregated client orders are handled correctly.
- Improve Operational Efficiency: By automating compliance checks, investment firms can focus on their core operations and reduce the administrative burden of regulatory compliance.
In Conclusion
MiFID II transaction reporting guidelines, especially those related to INTC, are a crucial aspect of regulatory compliance for investment firms. Ensuring the proper use of INTC is essential to avoid regulatory pitfalls. Qomply stands ready to assist investment firms in navigating the complexities of MiFID II and INTC, ensuring that your transactions are reported accurately and in compliance with the latest regulations.
How Qomply can help
Qomply’s Regulatory Reporting Hub combines regulatory expertise with AI, automation and data analytics to deliver scalable, audit-ready reporting intelligence that reduces errors, lowers remediation costs, and minimises operational and regulatory risk.
Covering regimes including MiFIR, EMIR Refit, SFTR, CFTC, CSA, MAS, ASIC and HKMA, Qomply also offers a fully managed service and operates globally from London.
Frequently asked questions
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INTC is the convention used to report aggregated client orders without implying principal trading. The article says it is used when a firm in agency capacity executes orders involving multiple client allocations.
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The two key rules are that market-side and client-allocation quantities must balance by the end of the day, and INTC should only be used for multiple clients, not a single client. The article presents those as the core compliance tests for aggregated client accounts.
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It says firms must report the earliest trade date and time for all client allocations when the market side was executed in multiple fills. The article presents that timing rule as a specific MiFID reporting requirement.
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It says ESMA has proposed replacing INTC with a unique code in the buyer and seller fields to make market trades and allocations easier to match. The article says that change would require firms to update their systems to generate and insert the new code.
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It says firms sometimes report the same LEI in multiple allocation reports for the same market-side trade, especially where several sub-funds sit under one LEI. The article says Qomply flags that pattern as a warning for review.
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