Buy-side firms across Europe must comply with new mandatory
reporting requirements from today, providing information on the valuation of transactions
and collateral posted for OTC and exchange-traded derivatives.
Six months on from the European market infrastructure
regulation’s (EMIR) first trade reporting deadline, the European Securities and
Markets Authority (ESMA) initiated the second phase of the rules, which the
market is still taking time to adapt to.
The aim of trade reporting enforcements is to collect market
data in order improve transparency and reduce systemic risk in the derivatives
Problems surrounding the matching of trades have hindered
the process though, with any discrepancy in the fields affecting the ability to
use the reports for their intended purpose.
As the buy-side faces the additional wave of paperwork, many
experts in the market feel that a large number of participants are not ready
for the extra burden.
“The problem we are facing is that EMIR is very wide in its
definition of derivatives,” said David Beatrix, senior business developer at
BNP Paribas Securities.
“People who trade FX forwards three times a year are not
prepared to deal with derivatives reporting requirements.”
Part of the G20 agreement in response to the financial
crisis was that all OTC derivatives trades had to be reported to a trade
Europe went one step further by enforcing similar rules for
exchange-traded derivatives as well.
As with the first stage of reporting mandates, ESMA also
issued a Q&A for valuations and collateral reporting, however Beatrix added
that the guidance came too late.
“The problems we have seen is with ESMA clarifying a few
last things late in the process,” he said. "There were some uncertainties which ESMA clarified in june."
Issues still exist throughout the process and firms will be
scrambling over the remainder of the year and beyond to meet the new
As theTRADEnews.com reported in July, national regulators are
expected to begin to clamp down on unmatched trades by handing out fines to
those found to have breached the rules.
You can read more
about the issues, solutions and impacts of the second round of trade reporting
rules in The Trade Derivatives Q3 edition, out in September.