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EMIR Reporting, Reconciliation & International Regulations progress

Treamo Business Consulting, providers of the EMIRate reporting service, describe the good and bad news in their recent report on EMIR progress.

ESMA introduces new guidelines for reconciliation between trade repositories

Treamo report that “the low reconciliation rate, which is rumoured to be under 3%, is the fact that practically all market players currently record 'something', which is generally accepted by the trade repositories, as soon as LEIs and UTI can be validated.The conventions, e.g. how a simple FX swap is to be reported, have either not been clarified, are simply not known or are ignored due to the fact that the lead time for adapting the systems was too short.”

Treamo is also worried by the way ESMA has sent the trade repositories a Level 1 Reconciliation Rules which, assuming the six trade repositories can reach an agreement in time, are scheduled to come into force on December 1, 2014 at the earliest. The alarm is at the use of the '1' in the name of the guideline: how many more to come? (No one trusts ESMA.)

Treamo recommend that, “You also take a close look at the responses from the trade repositories.” The Treamo service, EMIRate, automatically provides an easy-to-understand overview of these.

EMIR and auditors

Treamo report that several of their EMIR clients have already had their first (preliminary) audits. “These have focused, inter alia, on the documentation, the reporting process and the status of reports. In the case of the latter, it is notable that there have been differing, in some cases incorrect, interpretations, which is annoying since this leads to unnecessary explanatory work.” They then go on to say that, “Regardless of this, it is particularly the case in Germany that there is a legal basis for the audit (WpHG §20). Given that auditors are not in most cases directly involved in reporting processes and don't have any practical experience, particularly with regard to reconciliation, it is a good idea to keep documentation of unreconciled trades within easy reach.”

Derivative regulations outside the EU

While Dodd-Frank and EMIR are both in force with regards reporting regulations, the way ahead is still being clarified in other countries and regions. Treamo report that “In Switzerland and Canada, in any case, there are clear signs of regulations similar to those of EMIR, even if there are a number of minor differences, e.g. that Canadian companies will also be required to report the market value of derivatives once per quarter, while Switzerland will be adopting a reporting obligation more in line with Dodd-Frank (so-called 'one-sided reporting’).”


CTMfile take: The EMIR shambles continue and might be going global as country differences build up.

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Operations
Control & Compliance in Operations
FX Hedging & Risk Management
% Rate Hedging & Risk Management