Frequently asked questions
These frequently asked questions have been compiled following comments REGIS-TR has received from customers and market participants since the release of the revised RTS/ITS under EMIR which was to address potential improvements and existing deficiencies that had been identified since the reporting start date of EMIR in February 2014.
Who is required to report?
Under EMIR, all counterparties to all derivative transactions are required to report. Exmaples of companies that need to report include:
- Financial and non-financial counterparties; and
- Central Counterparties and Clearing Members.
However, a counterparty outside the EU does not have the obligation to report to a trade repository.
Which activity needs to be reported?
In terms of transactions that need to be reported, the following are in scope:
- Cleared and non-cleared exchange-traded derivative (ETD) and over-the-counter (OTC) traded contracts, with no exception on derivative products
- Lifecycle events (e.g. give-ups, partial termination etc.)
- Reporting of exposure: Daily reporting of valuations and collateral posted by FCs and NFCs above the clearing threshold
What data elements need to be reported?
All derivatives positions must be reported to a trade repository authorised by ESMA by the end of T+1. The information the needs to be reported includes:
- Common data
General common information related to contract type, contract information, transaction details, risk mitigation, clearing, modification to contract
Common data specific to each type of products (e.g. Interest rates, foreign exchange, commodities, energy, options, credit derivatives)
- Counterparty data
Information related to the counterparties of the contract as well as to the clearing member, broker entity, CCP, reporting entity, beneficiary etc.
- Collateral data (reporting of identifiers)
Legal entity identifier (LEI) for legal person identification, UPI or CFI for product classification, ISIN for product identification and bilaterally agreed UTI for Trade IDs, until global UTI is available
Since the implementation of the revised RTS as from the 1 November 2017 the regulation defines 129 data elements to be reported. Depending on the type of contract, those data elements are mandatory, conditional or optional.
When will the revised RTS/ITS under EMIR be applicable?
Since 1st of November 2017 the revised RTS/ITS are entered into force. These new technical standards significantly changed the regulation and especially the reporting of derivative contracts.
The main changes can be categorised as following:
Significant increase in the data fields reportable under EMIR, especially in regards to the reporting of collateral and valuation. Under the revised RTS/ITS, it is also now required to report additional information on credit derivatives and interest rate derivatives.
Furthermore, EMIR introduces an additional field “Level” to indicate whether the reporting is done on a trade level or a position level.
Based on the legal texts, the current number of 85 fields has increased to 129 fields in total (including counterparty, common and collateral data). However, this does not include a small number of REGIS-TR proprietary fields.
Please also note, that certain fields have been erased or renamed to better reflect market practices.
What is the revised back loading timeframe for terminated trades?
“Counterparties may face significant difficulty in obtaining all of the relevant information with regard to trades that were terminated before the commencement date for reporting. Given the resulting complexity of reporting terminated trades and the fact that such trades do not increase systemic risk, the period for reporting terminated trades should be extended from 3 years to 5 years from the commencement date for reporting.”
Which means that the deadline for back loading will now be the 12 February 2019 instead of the 12 February 2017.
Besides, according to the “TR Question 4” on the Reporting of Outstanding Position in the context of the Backloading, it is mentioned that, “For all ETD contracts concluded before the reporting start date, there is no need to report separately any life cycle events which occurred before the reporting date. The contract can be reported at position level in its final state or, for contracts which are still outstanding, its state at the time the report is submitted”. Due to the number of questions received in regards to the backloading of ETD and due to the fact that a number of participants understood that there is nothing to report for ETDs, REGIS-TR is currently in discussion with ESMA to clarify this point.
On 4 May 2017, an amendment and simplification of the regulation (EU) No 648/2012 in the context of its Regulatory Fitness and Performance (REFIT) programme has been proposed by ESMA, to address disproportionate compliance costs, transparency issues and insufficient access to clearing for certain counterparties. Apart from several changes in regards to the clearing obligation, the main changes have been made in the reporting obligation in terms of entities having the responsibility to report as well as the reportable transactions.
From a reporting perspective the proposed changes can be summarised as following:
- Transactions between a Financial Counterparty (FC) and a Non-Financial Counterparty not subjected to the clearing obligation (- NFC) will now be reported by the Financial Counterparty (FC) on behalf of both counterparties.
- Intragroup transactions will no longer have to be reported if the parent company is a NFC
- Entities that became subject to EMIR after the reporting obligation came into effect, were subject to the back-loading by the end of 12 February 2019.This obligation shall be removed with REFIT.
- Commission proposed ETDs to be reported by the CCP on behalf of both counterparties.
Currently this approach is still under discussion between the European Commission, The European Parliament and the EU’s Council of Ministers, so that the entry and the scope of the change are not defines yet.
A reporting firm wishes to move from its existing TR to a new one, or
- A TR withdraws from the market
- This new portability protocol needs to be applied by all TRs since the 31st of December 2018.
The document creates a clear charter between the reporting firm, the old TR and the new one, cuts across commercial constraints and competition, and puts at its heart the reporting firm and its right to access a free market of trade repositories - exactly as envisaged under EMIR.
For firms considering whether and how to move from their existing TR to a new one, the following aspects are highly informative.
The reporting firm, the old TR and the new TR will agree a binding migration plan between them detailing, amongst other things:
- The scope of the data to be transferred,
- The roles of the three parties involved in the transfer,
- The timeline for the transfer,
- Controls to ensure the integrity and confidentiality of the data during the transfer process, and
- How transferred data should be re-processed through the Inter-TR reconciliation.
- The transfer of data between trade repositories will be carried out entirely between the old and new TR. Reporting firms will not have to cancel or error data at their old TR, nor re-report data at the new one.
- From a technology perspective, TRs will transfer data using the ISO20022 format to ensure the ongoing quality of the data reported.
- ESMA details how the transfer of large datasets, which may take more than one day to complete, should be performed so as to maintain the integrity of the historical and BAU reporting.
- With regards to the costs to reporting firms of porting to a new TR, ESMA specifically states that, whilst recognising that "there is a cost related to the transfer of data that will be borne by the old TR", nonetheless "the fees should not be set to high so as to disincentivise TR participants from transferring their derivatives to another TR".
- Clarity on portability can only foster competition between TRs, driving improvements in service quality, product innovation and ensuring competitive pricing.
- Firms who have historically reported to whichever TR was most ubiquitous in either their part of the world, or their business line, are now re-evaluating that choice based on the total cost of reporting, their ability to demonstrate their compliance with the reporting regulations, and in light of their need to consolidate their systemic risk reporting across not just EMIR, but now also the FinfraG and SFTR regimes.
Get in touch to see how we can support you make the move with our Transition Management support.
Whatever happens in the Brexit negotiations, we’re clear that we will apply for authorisation from the FCA, as will those Trade Repositories already domiciled in the UK but currently only authorised by ESMA for the European Union (and who will also be in the process of building out new capability in EU27).
We are in constructive discussions with the FCA and other UK authorities to clarify the details of what exactly is required from a TR to continue servicing our UK-basesd clients in fulfilling their reporting requirements post BREXIT.
Our current understanding is that the UK TR must be a separate legal entity, with “meaningful” presence in the UK and that the reporting flows must be completely separated from the EU 27 flows. As one of REGIS-TR’s parent companies already has a UK presence, we are confident of being able to set-up a UK TR, even in the case of a “hard BREXIT”.