People in The Trade

EMIR compliance overtakes Dodd-Frank for buy-side

As buy-side firms begin swaps reporting under the Dodd-Frank Act, many are more concerned about wider reporting requirements under the European market infrastructure regulation (EMIR), according to Arun Karur, vice president, Sapient Global Markets.

Last week's 10 April reporting date for buy-side firms under Commodity Futures Trading Commission (CFTC) rules foreshadow the 10 June date when client clearing will formally begin for most buy-side firms' swaps trades. 

The April deadline means buy-side firms - i.e. institutions not defined as swap dealers or major swap participants by the CFTC -must report trades in which they are a counterparty.

In June, asset managers must centrally clear specified CDX and iTraxx credit derivatives as well as standard interest rate derivatives denominated in dollar, euro, sterling or yen.

However, Karur asserts a major portion of buy-side firms on both sides of the Atlantic are dedicating more time and resources to EMIR's September reporting date.

"Many buy-side firms are realising the reporting requirement of EMIR will be significant and markedly different from Dodd-Frank requirements. Firms will need to develop automated solutions to report trades and will not be able to rely on their dealers as can be done under Dodd-Frank," Karur said.

Both Dodd-Frank and EMIR have been subjected to delays in establishing final, binding rules governing swaps trades reporting, but buy-side firm's key concern in EMIR is the wider reporting catchment it demands.

Reporting requirements are a core difference between EMIR and Dodd-Frank. EMIR will require market participants to report swaps and listed derivatives trades in addition to submitting collateral reports. Dodd-Frank only requires reporting of swaps trades. Unlike EMIR, Dodd-Frank allows swap dealers to report on behalf of their buy-side clients.

Under EMIR, mandatory clearing is expected to fall in mid-2014, although asset managers will be subject to the reporting requirements from September this year.

"There have been a number of changes and delays to regulation in the US and Europe, and I expect current EMIR proposals to also undergo changes as more firms dive into the details and seek clarifications from the regulators on specific rules to meet the September deadline," he said.

As part of the reporting requirements OTC derivatives must be reported to swap data repositories (SDRs) and this week Sapient formally announced connectivity between its Compliance Management and Reporting System and the Depository Trust and Clearing Corporation's SDR. Sapient also plan to connect to SDRs run by US exchange venue operators and derivatives giants the Chicago Mercantile Exchange (CME) and IntercontinentalExchange (ICE) later this year.

"Being able to report trades through one system to either of the three SDRs will give the buy-side flexibility and remove some operational strain on resources asset managers are experiencing in meeting the numerous elements of both Dodd-Frank and EMIR," Karur said.

Karur added that as regulatory reporting deadlines approached, firms must work toward achieving a single view of their compliance status and a streamlined method of translating data from multiple sources into the format required by regulators.

Richard Henderson +1 212 217 6916 richard.henderson@information-partners.com