Allowing the markets the flexibility to use either one of two methods for identifying derivative instruments will avoid significant costs to the exchange industry, banks and users of capital markets.

FESE views transaction reporting as a vital tool of MiFID's objective of ensuring market integrity and preventing market abuse in EU markets. However, in the course of CESR's consultation on this issue in January 2007, FESE Members discovered significant problems that would have resulted from the mandatory use of the ISIN code for all derivatives. As a result of these concerns, FESE coordinated the work of a group of trade bodies and organisations ('Industry Coalition') from a broad cross-section of the European financial services community with the purpose of finding a suitable methodology to identify derivative instruments in those markets where the ISIN code would not be optimal. The breadth of the market participants working with FESE on this issue reflects the significant impact that the transaction reporting rules have on a wide spectrum of users.

The result of this work is the "Alternative Instrument Identifier" (AII), which we believe will guarantee the stable uniqueness of the identification of individual instruments for all products covered. The method is cost-effective and open as the data fields required are readily available to all parties concerned.

The flexibility offered through CESR's decision to allow the use of either method, the AII or the ISIN code, will preserve the competitiveness of one of the most dynamic segments of the European financial services industry.

In its collaboration with the industry, CESR has demonstrated a genuine openness to consider alternative means to achieve its policy objectives and a commitment to adopt policies that are cost-effective and efficient from the perspective of the EU Single Market.

FESE is committed to continuing its work with CESR on all aspects of the implementation of transaction reporting.