FinfraG

The Swiss Financial Market Infrastructure Act (FinMIA), also known under the German denomination FinfraG (Finanzmarktinfrastrukturgesetz), came into force on 1 January 2016. It regulates: 

1. The organisation and the operation of financial market infrastructures, including stock exchanges and trade repositories; 
2. The trading of derivatives; 
3. The conduct of business rules, linked for example to insider trading and market manipulations, shareholding disclosures and public takeovers offers. 

The main rationale behind the FinfraG regulation is to increase transparency in the Swiss derivatives market, and to mitigate systemic, counterparty and operational risks. The objective is to align the Swiss regulatory framework with international standards, in particular with EU regulations (MiFID, MiFIR, EMIR and CSDR). Specifically regarding derivatives trading, FinfraG introduced broad changes to the Swiss derivatives market and aims at increased transparency, reduced counterparty and operational risk in trading, as well as enhanced market integrity and oversight.

REGIS-TR provides clients with a one-stop shop for European regulatory reporting, including transaction, position and valuation reporting for FinfraG. By using REGIS-TR for reporting, you will benefit from operational efficiencies including: 

• Very similar message formats used across European reporting regimes;
• A streamlined onboarding process for existing REGIS-TR customers;
• Synergies from using a one-stop regulatory reporting solution provider; 
• Access to expert staff and detailed supporting documentation provided by an experienced trade repository; and 
• A transparent and easily understandable fee schedule. 

Together these operational efficiencies mean that you will benefit from an easier transfer and dischange of your FinfraG reporting obligation. 

• Both ETD and OTC transactions have to be reported. 
• Every event of the transaction lifecycle has to be reported: origination, modification, valuation and termination 
• Reporting of transactions, positions and valuations 
• Not considered as derivatives according to FinfraG, and thus out of scope:
  - structured products such as capital-protected products, capped return products and certificates
  - securities lending and borrowing

FinfraG affects all entities, which have their registered office in Switzerland and enter into derivative trading (“Swiss counterparties”). Both financial counterparties (e.g. banks, brokers, insurance companies, asset managers etc.) and non-financial counterparties (e.g. trading companies, corporation etc.) fall under the scope of this reporting obligation. As the reporting under FinfraG is single sided, only one counterparty has to report. Specific reporting obligations need to be considered under FinfraG regulation: 

• In the case of transactions between a financial and a non-financial counterparty: the financial counterparty has the reporting obligation 
• In the case of transactions between two financial counterparties: i) the financial counterparty which is not small in accordance with Article 99 FinMIA has the reporting obligation, ii) the selling counterparty has the reporting obligation in the case of a transaction between two financial counterparties or between two small financial counterparties 
• The counterparty which has its registered office in Switzerland if the foreign counterparty does not report.
  - In the event of a transaction between non-financial counterparties, the above first two bullet points apply by analogy. A transaction between small non-financial counterparties does not have to be reported o If the transaction is cleared centrally, the report is submitted by the central counterparty. If a recognised foreign central counterparty does not submit reports, the reporting duty shall remain with the counterparties
  - Third parties may be involved in reporting

The following transactions need to be reported under FinfraG: 

• All financial transactions belonging to the following asset categories: Commodites (CO), Credit (CR), Currencies (CU), Equity securities (EQ), Interest rates (IR) and other derivatives (OT). 
• Every event of the transaction lifecycle: origination, modification, valuation and termination 
• Reporting of transactions, positions and valuations For each reported transaction, the following information should be included:
  - Transaction identification: such as UTI
  - Counterparty identification: including ID (e.g. LEI, BIC), name and registered office
  - Product identification: including asset class (CO, CR, CU, EQ, IR or OT), contact type (e.g. option, swap or forward), amount, price, maturity date, settlement date and currency
  - Transaction information: such as date and time of the transaction

Certain transactions are not considered as derivatives under FinfraG, and are therefore out of scope. These include: 

• structured products such as capital-protected products, capped return products and certificates; 
• securities lending and borrowing; and 
• transactions relating to commodities that: o must be physically settled; o cannot be cash-settled at a party’s discretion; o are not traded on a trading venue or an organised trading facility

Transactions must be reported to the Swiss regulator, FINMA via a FINMA authorised Trade Repository. FinfraG reporting is single sided, meaning that only one counterparty needs to report a transaction. The reporting counterparty is defined according to a cascade principle - in other words: 

• All transactions cleared through a central counterparty (CCP) need to be reported by the CCP. However, if the recognised foreign CCP does not submit reports, the reporting duty remains with the counterparties
• For uncleared transactions: o Financial Counterparties (FCs) will always report when trading with a Non-Financial Counterparty (NFCs) o Large counterparties will always report when trading with small ones. Transactions between small non-financial counterparties (NFC-) are exempted from reporting obligations Counterparties will have the possibility to either report directly or to delegate the reporting