We wanted to find out how the industry had dealt with the start of the EMIR derivatives contracts reporting obligation, which came into effect on 12 February 2014. We also wanted to assess the industry’s preparations for the start of the EMIR collateral and valuation reporting obligation on 11 August 2014. The review was based on discussions with counterparties between March and June 2014 and analysis of the reports produced by or on behalf of counterparties since the start of reporting.
This is our second review on the industry’s preparedness for and compliance with EMIR reporting. The first review assessed industry’s preparations for the start of reporting the EMIR derivatives contracts reporting obligation. The findings were published in February 2014.
The firms contacted have been reporting since 12 February 2014. They are doing this on the basis of EMIR, using the published ESMA Q&As relating to EMIR reporting, and discussions with us and trade associations. Some of these firms will also be required to start reporting collateral and valuation updates from 11 August 2014.
Overall, it appears that the vast majority of derivatives contracts are being reported.
However, there are some issues with the quality of some of the reports and some areas where there are continuing uncertainties about reporting. Financial Counterparties and Non-Financial Counterparties subject to the clearing obligation in line with EMIR Article 10 are preparing to report collateral posted and valuation updates from August and this obligation is generating further questions and uncertainties across the EU. These are being addressed through updated ESMA Q&As.
Firms had generally selected the trade repositories that they wished to use and their use of delegation ahead of the start of reporting. However, some firms were not able to start reporting on the actual start date due to on-boarding issues with their chosen channels. Most of these firms have caught up and are up-to-date with their reporting.
The first phase of backloading is now complete. The second phase will continue until 2017. Some firms managed to start backloading before the start date and this helped manage the operational impact of the start of reporting, but the need to retrospectively allocate identifiers to old trades to ensure compliance with the reporting rules caused some difficulties.
Some firms are considering making use of position-level reporting for the second phase of backloading.
Since our first review, we have analysed samples of EMIR reports that fall within our jurisdiction, held discussions with reporting counterparties and answered questions from them. Whilst, we have found the majority of reporting to be correct and successful, we have discovered the following issues:
Certain counterparties (‘financial counterparties’, and ‘non-financial counterparties’ that exceed the clearing threshold specified under EMIR Article 10) will be required to report collateral posted against their outstanding positions and valuation updates from 11 August 2014. Many of these counterparties are now preparing for this. We have had a number of discussions with them and trade associations about the details. In addition, ESMA issued additional Q&As on 23 June 2014 describing how obligations in this regard can be interpreted.
The main questions raised by counterparties so far are:
Both of these are addressed by the new Q&As.
Copyright © 2016 FCA. All Rights Reserved.