Europe not prepared for derivatives trade reporting
trade data to be reported by the buy-side for the first time next week is
unlikely to be 100% accurate, according to Xavier Hoche, COO, trading and
securities financing, at AXA Investment Managers.
12 February deadline is fast approaching, with market participants required to
report derivatives trades to one of six approved trade repositories (TRs), to
comply with European market infrastructure regulation (EMIR).
the reporting deadline being pushed back from the original Q3 2013 start date,
questions remained around some requirements, including how unique trade
identifiers – one of 85 data fields required – would be assigned and
exchange-traded derivatives (ETDs) reported.
said the industry hasn’t been prepared enough for trade reporting, and getting
everything ready for next week’s deadline has been a time-consuming process.
“On day one, will the data we and the banks report be 100% accurate? I
don’t think so – it can’t be given the issues the industry is facing today,” he
have expressed our concerns officially to the regulatory bodies and they are
well aware of this. But we need to ensure that we do whatever we can to face
has decided to report OTC derivatives trades directly to its chosen TR, the
Depository Trust and Clearing Corporation’s (DTCC) Derivatives Repository, given the
number of OTC derivatives positions and counterparties it has.
with the European Securities and Markets Authority (ESMA) only publishing
much-needed guidance on ETD reporting in late December, after the European
Commission denied the regulator an extension, Axa decided to leave ETD
reporting to its clearing members.
number of organisations are offering to help buy-side market participants with
reporting requirements. Financial information provider Markit is reporting OTC
derivatives trades in rates, credit and equities for customers needing to
comply with EMIR through MarkitServ. Bloomberg has also launched a trade
reporting tool, allowing users to send their trade data to a TR of their choice.
Global Reporting Company (GRC), which launched in October last year by new
London-based derivatives exchange the Global Markets Exchange Group and
regulatory and market infrastructure advisory firm CoDiese, is providing an
end-to-end trade reporting service, focusing on the needs of corporate and
Langlois, co-founder of GRC, said going through a custodian appeared to be the
natural way for institutional investors to report derivatives trades, but GRC
found many buy-side firms wanted to keep control of the reporting process.
institutional investors wanted to go direct, but if they don’t have the size
and resource both in terms of systems and compliance, they realised it was not
a safe option,” she said.
said GRC allows buy-side firms to monitor the data sent on their behalf, giving
them the assurance that the reported data is accurate.
said getting ready for the reporting deadline hasn’t been an easy ride. Axa has
been working with the DTCC for OTC derivatives reporting since mid-last year,
but the investment management firm has struggled to get feedback from the TR.
know it’s been roughly the same with other trade repositories,” he said. “TRs and
banks seem overwhelmed, receiving too many request from too many people wanting
to use their services for trade reporting.”
Central Securities Depository of Poland (KDPW), REGIS-TR, a joint venture by
Iberclear and Clearstream, the London Stock Exchange’s UnaVista, ICE Trade
Vault Europe and the CME Trade Repository are other regulatory- approved TRs.
Macbeth, CEO of DTCC Derivatives Repository, said there has been a “flurry of
activity” in the lead-up to 12 February, especially in the past few weeks.
is making all efforts to help get these clients on board to our European trade repository
and commence reporting,” he said. “Many of them have successfully completed
their testing and we have a significant portfolio of trades back-loaded in the
for ETDs, Hoche said AXA only received draft delegation agreements at the end
of December from the best-prepared clearing members, leaving little time for
wanted to change clauses, but were told there was no time to negotiate.” Axa
signed the agreements, but inserted a clause that gives them the right to
re-negotiate the terms at a later date.
said: “Overall, you can see that the industry was not really prepared and that trade
reporting is not a mature industry at all.” And with only a few days to go,
there is no time to sit back. “Up until the last minute, I’m sure there will be
issues to sort out. We won’t rest after 12 February either, because other
issues may come up.”
Seibel, a spokesman for ESMA, said reporting requirements have been in place
for a year now, but given EMIR covers both financial and non-financials
institutions, the regulator understood participants may face difficulties.
“From 12 February, it will be for national regulators to police trade
reporting at national level and if need be, enforce the rules in a sensible and
proportionate manner, taking into consideration the specifics of each case,” he