Monday, August 11, 2014 12:55:46 PM

Additional trade reporting requirements come into force

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 markets.

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 repository.

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 requirements.

As 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.

Jon Watkins +44 (0) 20 7397 3815