New EU Rules on Derivatives Trading The EMIR Reporting Technical Standards Victoria Cooley OTC...
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Transcript of New EU Rules on Derivatives Trading The EMIR Reporting Technical Standards Victoria Cooley OTC...
![Page 1: New EU Rules on Derivatives Trading The EMIR Reporting Technical Standards Victoria Cooley OTC Derivatives & Post Trade Policy Financial Conduct Authority.](https://reader036.fdocuments.in/reader036/viewer/2022062223/551aa5c6550346856e8b47d4/html5/thumbnails/1.jpg)
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New EU Rules on Derivatives Trading
The EMIR Reporting Technical Standards
Victoria CooleyOTC Derivatives & Post Trade Policy
Financial Conduct Authority
![Page 2: New EU Rules on Derivatives Trading The EMIR Reporting Technical Standards Victoria Cooley OTC Derivatives & Post Trade Policy Financial Conduct Authority.](https://reader036.fdocuments.in/reader036/viewer/2022062223/551aa5c6550346856e8b47d4/html5/thumbnails/2.jpg)
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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. Non-centrally cleared contracts should be subject to higher capital requirements.
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The reporting requirements
![Page 5: New EU Rules on Derivatives Trading The EMIR Reporting Technical Standards Victoria Cooley OTC Derivatives & Post Trade Policy Financial Conduct Authority.](https://reader036.fdocuments.in/reader036/viewer/2022062223/551aa5c6550346856e8b47d4/html5/thumbnails/5.jpg)
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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’;
- the parties to the contract (or the beneficiary) - type of contract - maturity - notional value - price - settlement date - unique trade identification - amendments to trade
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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
• 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
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Clearing models
• 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
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Who has reporting obligation
• 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
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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• 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
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• 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
Identifiers
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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/international-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?