For the European major rules, one of the key factors in determining the jurisdiction where a particular security should be disclosed is the home Member State.
The phrase Member State simply refers to a particular country/state which is a member of the EU. The word home is used in distinction to host in describing the country and corresponding regulatory body that govern the disclosure obligations for a given security. Any TDA related disclosure will be made to the relevant competent authority (RCA) of the particular Member State. This is captured in Rapptr using the property HomeMemberState.
How Rapptr populates this property
One of the benefits of Rapptr is that we take advantage of publicly available regulatory data to populate the HomeMemberState property. ESMA is the EU authority who maintains the Financial Instruments Reference Data System (FIRDS) which contains a listing of RCAs for securities traded in the EU. We scrape this data continuously (on a weekly basis) and utilise it in our rules.
Keep in mind, that although Rapptr will automatically populate this field, you are always able to declare a value for this property in your file if you have reason to be certain about the HomeMemberState for a particular security. Please also let our support team know if your information differs from the ESMA List or the other logic outlined here.
There is a multi-step selection hierarchy to how Rapptr populates HomeMemberState.
- If the security's ISIN (or underlying ISIN for derivatives) matches an ISIN in the FIRDS database and FIRDS indicates that it is traded on an EU Regulated Market (this is determined by checking the MICs against the those identified as "RM" on ESMA's list of EU markets and entities), we use the country of the RCA from this list. Note that for DRs, we check the ISIN of the DR and its underlier.
- If there is no FIRDS match, and if the security's country of incorporation is in the EEA and the security has any listing (via MarketsListedIn) on an EU Regulated Market, we use the security's country of incorporation as provided in your position file.
- If the security does not meet the criteria in (2), we populate the HomeMemberState with the country code (if it is an EEA country) associated with the primary market for the security (using the property, Market, as provided in your file).
To be clear about which option Rapptr has used, we populate one of the following values in a property called HomeMemberStateSource, listed here in order of the logic above: FIRDS, Country Of Incorporation, or Country Of Listing.
The population of the country of the primary market as a second and a third option may lead to a HomeMemberState selection that is not official. We have employed this as a conservative measure to ensure that securities with a primary market in the EEA (where we could not automate the determination), are assigned an EU country for disclosure.
Let’s take a look a the regulatory framework where we use home Member State…
EU Major Shareholding - EU Transparency Directive and Amendment (TDA)
Although there is no specific reference to the MiFID regulation as seen in the EU Short Selling regulations, the TDA (Directive 2013/50/EU) clarifies (in sections 19-21) that, where an issuer has not chosen a home Member State, the home Member State is the country of incorporation of the issuer if they are traded on an EU regulated market (this justifies our secondary selection as described above).
The FIRDS database contains all shares that are traded on variety trading venues in the EU and their related competent authority and therefore functions as a primary selection with an additional check if the security has any listing on an EU Regulated Market.
For “third-country issuers” (non-EU incorporated companies), issuers are obligated to choose their home Member State. While Rapptr does not include any absolute logic in determining this country for non-EU issuers, we expect many would be incorporated into the FIRDS database. If not, the tertiary criterion (see above) is based on looking at a securities primary market (via the Market property) and assigning the country of this primary market, if it is in the EU.
Note that the TDA now makes it obligatory that each issuer discloses their choice for home Member State to the relevant competent authority in the home Member State and via press release.
Why doesn’t ESMA produce one golden source for the appropriate home Member State related to the TDA obligations?
In fact, Article 22.1 of the TD itself includes a requirement that guidelines and plans be created by ESMA and each country’s regulatory authority to work in “facilitating public access to information” in relation to the TD, including the EU Member State that is associated with each issuer. Much of this detail is described in the Draft RTS on the European Electronic Access Point (EEAP) (PDF), and the section “Financial Reporting” on ESMA’s TDA website which mentions the EEAP. Unfortunately, the RTS hasn’t been finalised and the EEAP has been delayed.
In January 2018, FundApps asked ESMA specifically why the EEAP is not yet available as planned and when it might be completed. They have noted that the “ESMA Board of Supervisors has decided beginning of last year  to de-prioritise the EEAP project and pause it. It has not yet been decided when the next go-live date will be.”
At the point the EEAP is created (which will likely include the LEI as the standard identifier for issuers) FundApps will automate its use in our rules as the official source for the home Member State as it relates to the TDA. Until then, the process as described in the above article remains the most prudent course of action.
Q. I am seeing a number of new disclosures trigger today (NAV date 9 April) on Major: Germany - WpHG 21, whereas last week (NAV date 6 April), the same holding was being caught by the Major: GB rule. What is this due to?
A. The most likely reason for this is that on the weekends (in this case 7-8 April) we scrape and parse the FIRDS data, this is when ESMA update their list. The possible reasons are as follows:
- EEAMarkets updated to include more regulated markets
- an ISIN was added to the FIRDS list
- new markets were added to that ISIN on the FIRDS list
All of these reasons subsequently update the FIRDs list, and therefore HomeMemberStateSource is likely to change.