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A Guide to Electronic Communications in MiFID II, Article 16

December 22, 20172 min read

Find out how to be compliant with MiFID II, Article 16

Even with MiFID II implemented, many firms are still struggling with the extent of their responsibilities in order to comply with the updated legislation.

One particular aspect of the legislation that has proved difficult to interpret is Article 16, regarding recording electronic communications - the main confusion of which, is defining what "electronic communications" are.

A Summary of MiFID II, Article 16

Compared to its predecessor, Article 16 of the MiFID II Directive includes much stricter rules where electronic communications recording is concerned and what safeguarding firms will be required to undertake going forward:

Article 16(7) states:

"Records shall include the recording of telephone conversations or electronic communications relating to, at least, transactions concluded when dealing on own account and the provision of client order services that relate to the reception, transmission and execution of client orders."

It goes on to say:

"Such telephone conversations and electronic communications shall also include those that are intended to result in transactions concluded when dealing on own account or in the provision of client order services that relate to the reception, transmission and execution of client orders, even if those conversations or communications do not result in the conclusion of such transactions or in the provision of client order services."

Firms will be required to keep a record of all communications that conclude in a sale or intended to result in a sale. In addition to this, firms will also be legally obliged to keep a record of these communications for up to seven years (dependant on local regulation requirements).