Due to new derivatives regulation, European market participants should have been reporting derivatives trades for the past 12 days – but have they?
Was the market ready for reporting?
Market participants have had to report derivatives trades since 12 February. Many buy-side firms have decided to delegate reporting, giving the job to a third-party or broker. Others have chosen to do the reporting themselves, as at the end of the day, the responsibility will always fall on them. There have been reports of firms still seeking help with reporting after deadline, however.
Henry Hunter, managing director at MarkitServ, which is providing reporting for OTC derivatives trades in rates, credit and equities, said he was still seeing clients approaching the provider for delegated reporting last week. “Clearly that’s past the deadline, but perhaps some clients are not feeling the same pressure around the compliance date that swap dealers may have felt in the US last year,” Hunter said. “We understand regulators have signaled that there may be some leniency for people who are showing best efforts to comply.” There have also been anecdotal reports that some firms that had previously decided to report themselves have changed their minds following the deadline.
How has reporting gone so far?
There have been reports of slight hiccups in the past couple of weeks. There have been news reports of market participants not being able to report because of an onboarding backlog at trade repositories (TRs). Some firms that were able to connect to TRs, in some cases, had trouble submitting data because of issues at a TR, while others weren’t able to access data handed-in to TRs on their behalf. The issues in reporting aren’t surprising though. It’s been long expected that there would be trouble when deadline struck. Market participants are optimistic that things will get better over time.
However, European market infrastructure regulation (EMIR) Q&A changes, recently released by the European Securities and Markets Authority, raised concerns, as market participants believe it could create further confusion and inconsistency in data.
What’s next?
As all involved parties continue to work towards efficient reporting, attention will start to drift towards clearing. EMIR also mandates, as agreed by the G20 in Pittsburgh five years ago, that all OTC derivatives trades be centrally cleared. This rule has already been introduced in the US, but has yet to take effect in Europe. Central counterparties have applied for regulatory approval under the new framework, and ESMA is then expected to draft regulatory technical standards later this year.
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