New EU Rules on Derivatives Trading
The EMIR Reporting Technical
Standards
Victoria Cooley
OTC Derivatives & Post Trade Policy
Financial Conduct Authority
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Agenda
1. Introduction to EMIR
2. The reporting requirements
3. Frequently asked questions
4. Reporting to trade repositories
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Introduction
G20 statement in Pittsburgh:
All standardised OTC derivative contracts
should be traded on exchanges or
electronic trading platforms, where
appropriate, and cleared through central
counterparties by end-2012 at the latest.
OTC derivative contracts should be
reported to trade repositories. Noncentrally cleared contracts should be
subject to higher capital requirements.
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The reporting requirements
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Reporting obligation
•
Applies to all counterparties to all derivative contracts
(OTC and exchange traded)
•
Information to be reported to TRs - about 60 data fields
in total!
•
Basic trade information, ‘who, what, when, how many
and how much’;
-
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the parties to the contract (or the beneficiary)
type of contract
maturity
notional value
price
settlement date
unique trade identification
amendments to trade
Reporting of exposures
•
Essential for monitoring systemic risk
•
Only financial and non-financial counterparties
(NFC) above the clearing threshold are
required to report exposures
•
Information to be reported daily;
- Mark to market or model valuations
- Collateral value and basis (transaction or portfolio)
• 6 month transitional from reporting start dates
for reporting exposures information
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Timeline for reporting
•
Credit and interest rate derivatives;
- If no registered TRs by 1 April – 90 days
after registration
- Expected mid-September 2013
•
For all other derivatives;
- If TR is registered by 1 October - reporting
begins 1 January 2014
- If no registered TRs by 1 October – 90 days
after registration
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Timeline for reporting
• Backloading of existing trades
•
If outstanding at time of reporting date;
- 90 days to report to TR
- report in current position
•
If not outstanding, but remained
outstanding on 16 August 2012;
- 3 years to report to TR
- report final position
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Frequently asked questions
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Frequently asked questions
• There is a need to ensure harmonisation of
reporting across EU
• ESMA published 1st set of Q&As in March 2013
• Expected to be an iterative process
• Need for immediate Q&As for trading scenarios,
give up trades, block/allocation trades
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Frequently asked questions
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•
Still some uncertainty around
interpretation
•
Work is ongoing to establish how EMIR
applies in some situations
•
Rest of the presentation represents current
FCA views and may be subject to further
clarification by either the European
Commission or ESMA
Clearing models
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•
If the process involves creation of a
bilateral trade followed by novation,
separate reports likely to be required
•
If clearing is instantaneous and no bilateral
trade exists, only the cleared trade should
need to be reported
•
Correct approach where novation occurs
very quickly after bilateral execution still
subject to discussion
Who has reporting obligation
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•
Brokers and dealers do not have a
reporting obligation when they act purely
in an agency capacity
•
Still some uncertainty over how to report
transactions where a broker, dealer or
clearing member clears or facilitates a
transaction for a client on a principle basis
Give up trades
• Only counterparties to the contract
have reporting obligation
• Typically, counterparty and CCP would
report
• Approach still to be agreed at EU level
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Reporting of block/allocation trades
• No exemptions – reporting obligation applies to
all derivative transactions
• If block trade gives rise to multiple
transactions, each of those would have to be
reported
• Process still to be agreed at EU level however
we expect both stages to be reported
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Reporting to trade repositories
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How to fulfil reporting obligation
• Both counterparties MUST report each trade unless by
prior arrangement, one party can report on behalf of
both counterparties
• Either counterparty may also delegate reporting to a
third-party (such as a CCP or trading platform)
• Likely through contractual obligations with one another
which should set out what information is to be reported
• Regulatory responsibility remains with original
counterparties
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Practical preparations
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•
Firms either have to establish delegated reporting
arrangements or direct connectivity with a TR
•
If delegating;
- make sure delegate is willing to accept the
delegation (including for any intragroup trades)
- have processes in place to ensure that
reports submitted on your behalf are accurate
•
If want to connect directly to a TR;
- start now
- consider whether TR(s) will be authorised in time
- will TR cover all asset classes for all reporting
obligations
Identifiers
• Legal entity identifiers (LEI)
- ROC established January
- Expect Central Operating Unit to be formed
in April/May
- Interim phase – Local Operating Units
- Expect pre-LEIs code to be mutually
recognised
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Identifiers
• Unique product identifiers
- No agreed EU UPI
- Existing codes, ESMA taxonomy
• Unique trade identifiers
- No agreed EU UTI
- Counterparty generates and agrees with
other counterparty
- Lifecycle events include UTI linked to
original UTI
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Further information – visit our website
www.fca.org.uk/firms/markets/internation
al-markets/emir
• Links to Commission and ESMA
publications
• Link to ESMA Q&A
• Link to FCA consultations
• EMIR mailing list
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Any questions?
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