Reporting of exposures under the EMIR Regulation


 

Reporting of exposures under EMIR has been stipulated in greater detail in:

 

Commission Delegated Regulation (EU) No 148/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC deriva­tives, central counterparties and trade repositories with regard to regulatory technical standards on the minimum details of the data to be reported to trade repositories (see, in particular, the wording of Article 3 in the box below),

 

Commission Implementing Regulation No 1247/2012 of 19 December 2012 laying down implementing technical standards with regard to the format and frequency of trade reports to trade repositories.

 

Current EMIR derivatives reporting framework, as codified in the above regulations, mandates "the value the total amount of collateral posted" in Table 1 Field 25 ("Value of collateral") to be populated.

 

Under rules currently in force this includes the sum of any initial margin and any variation margin posted (as specified in the ESMA Q&As TR Answer 3a).

 

In the context of reporting, variation margin means margins collected or paid out to reflect current exposures resulting from actual changes in market price, in turn, initial margin means margins collected by the counterparty to cover potential future exposure to the other counterparty providing the margin in the interval between the last margin collection and the liquidation of positions following a default of the other counterparty (see here further details on initial margin and variation margin).

 

Approaching legislative changes (ESMA's Final Report Review of the Regulatory and Implementing Technical Standards on reporting under Article 9 of EMIR of 13 November 2015 (ESMA/2015/1645) propose, however, to differentiate between the aforementioned two types of margin and to replace the "value of collateral" field in the EMIR derivatives' reporting format with two fields - separate for the "initial margin posted" and the "variation margin posted".

 

It is also proposed to introduce additional field for:

- the "initial margin received" and the "variation margin received", and

- excess collateral posted or received.

 

The said ESMA's Final Report of 13 November 2015 comments upon his issues as follows (p. 16):

"Given the near future "Margin requirement" implementation, for which counterparties will have in any way to make distinction between initial and variation margin for OTC derivatives, the proposed approach of disaggregating initial and variation margin is maintained. Moreover given the different valuable information brought by the distinction between collateral received and posted, the approach described in the consultation paper is maintained. However, based on the feedbacks, and to better fit with industry practices, ESMA considers appropriate to introduce additional fields to capture, as suggested, excess collateral posted or received. Additional fields are thus introduced (fields 32-35 table 1)".

 

 

Draft Commission Delegated Regulation amending Commission Delegated Regulation (EU) No 148/2013 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards on the minimum details of the data to be reported to trade 

 

(Annex 1 to the Final Report Review of the Regulatory and Implementing Technical Standards on reporting under Article 9 of EMIR of 13 November 2015 (ESMA/2015/1645))

 

Recitals 5 I 6

 

(5) In order to properly monitor concentration of exposures and systemic risk, it is crucial to ensure that complete and accurate information on exposure and collateral exchanged between two counterparties is submitted to trade repositories. Therefore, it is essential that counterparties report valuations of derivative contracts according to a common methodology. Furthermore, it is equally important to require reporting of posted and received initial and variation margins.


(6) In order to provide the competent authorities with complete information about real exposures of counterparties in all classes of derivatives, it is essential to set out the reporting requirements with respect to the details of credit derivatives as well as of collateral exchanged by the counterparties. Moreover, in order to enable the reporting parties to comply with their reporting obligations in the standardised and harmonised way, further clarifications are required with respect to descriptions of the existing fields. Consequently, the Annex to Delegated Regulation (EU) No 148/2013 should be amended in accordance with the Annex to this Regulation.

 

Article 3
Reporting of exposures


1. The data on collateral required in accordance with Table 1 of the Annex shall include all posted and received collateral.

2. Where a counterparty does not collateralise on a transaction level basis, counterparties shall report to a trade repository collateral posted and received on a portfolio basis.

3. Where the collateral related to a contract is reported on a portfolio basis, the reporting counterparty shall report to the trade repository a code identifying the portfolio related to the reported contract in accordance with field 23 in Table 1 of the Annex.

4. Non-financial counterparties other than those referred to in Article 10 of Regulation (EU) No 648/2012 shall not be required to report collateral, mark to market, or mark to model valuations of the contracts set out in Table 1 of the Annex to this Regulation.

5. For contracts cleared by a CCP, the counterparty shall report the valuation of the contract provided by the CCP.

6. For contracts not cleared by a CCP, the counterparty shall report the valuation of the contract performed in accordance with the methodology defined in International Financial Reporting Standard 13 Fair Value Measurement as adopted by the Union and referred to in the Annex to Regulation (EC) No 1126/2008.

 

 

 

Commission Delegated Regulation (EU) No 148/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC deriva­tives, central counterparties and trade repositories with regard to regulatory technical standards on the minimum details of the data to be reported to trade repositories  (OJ L 52, 23.02.2013, p. 1)

 

Recital 4

 

Valuation of derivative contracts is essential to allow regulators to fulfil their mandates, in particular when it comes to financial stability. The mark to market or mark to model value of a contract indicates the sign and size of the exposures related to that contract, and complements the information on the original value specified in the contract.

 

Article 3
Reporting of exposures


1. The data on collateral required under Table1 of the Annex shall include all posted collateral.

 

2. Where a counterparty does not collateralise on a trans­action level basis, counterparties shall report to a trade repository collateral posted on a portfolio basis.

 

3. Where the collateral related to a contract is reported on a portfolio basis, the reporting counterparty shall report to the trade repository a code identifying the portfolio of collateral posted to the other counterparty related to the reported contract.

 

4. Non-financial counterparties other than those referred to in Article 10 of Regulation (EU) No 648/2012 shall not be required to report collateral, mark to market, or mark to model valuations of the contracts referred to in Table 1 of the Annex.

 

5. For contracts cleared by a CCP, mark to market valuations shall only be provided by the CCP.

 

 

 

"52. Current Table 1 Field 25 "Value of collateral" field currently includes the value of all collateral and is therefore populated with the sum of any initial margin and any variation margin posted as specified in the ESMA "Q&A TR Answer 3a". Considering that the exchange of both initial and variation margins are required under EMIR, initial margin and variation margin shall indeed be reported. It is nonetheless proposed to differentiate between the two since they mitigate risks of different nature; the distinction between initial and variation margin would indeed allow for better monitoring of the different risks linked to derivatives exposures. To this purpose it is proposed to replace the "value of collateral field" with two fields for the "initial margin posted" and the "variation margin posted".

 

53. Furthermore, discussions with prudential regulators show that information on collateral received is crucial to ensure the proper monitoring of exposures. To this purpose it is proposed to introduce two additional fields for the "initial margin received" and the "variation margin received".

 

54. In the context of reporting, variation margin means margins collected or paid out to reflect current exposures resulting from actual changes in market price. Initial margin means margins collected by the counterparty to cover potential future exposure to the other counterparty providing the margin in the interval between the last margin collection and the liquidation of positions following a default of the other counterparty."

 

ESMA's Consultation Document, Review of the technical standards on reporting under Article 9 of EMIR of 10 November 2014 (ESMA/2014/1352). p. 13

 

 

 

TR Question 3a [last update 23 June 2014]

 

Article 9 of EMIR – Reporting of collateral

(a) How should information on collateral be reported to TRs?
(a1) Is there a need to specify the type of collateral?
(a2) should a collateral portfolio with multiple currency values be normalised to base currency or reported in multiple currency values?
(a3) How should non-cash collateral be reported?
(a4) What forms of collateral should be included?

(a5) How should counterparties report the collateral amount where the collateral agreement allows the covering of exposures in transactions that are not to be reported under EMIR?
(a6) When should collateral be reported for types of collateral (such as securities) where settlement of the movement could take place after the collateral movement was initiated?
(b) Is the 180 day extension for reporting of collateral also valid for reporting of valuations? What will be the earliest deadline for the reporting date?
(c) Shall change in the amount of collateral be reported as modification (M) or as valuation update (V) in Table 2 field No. 58?

 

TR Answer 3a

 

(a) As specified in Article 3 of Commission Delegated Regulation (EU) No 148/2013 (RTS on reporting to TR), collateral can be reported on a portfolio basis. This means the reporting of each single executed transaction should not include all the fields related to collateral, to the extent that each single transaction is assigned to a specific portfolio and the relevant information on the portfolio is reported on a daily basis (end of day).

the collateral should be reported at the total market value that has been posted by the Counterparty responsible for the report. Therefore any haircuts or similar used by the receiver of the collateral and any fees or similar amounts should all be ignored.

 

(a1) There is no such field for the moment given that reporting is performed at portfolio level. Field 22 on collateralisation refers to any collateral posted by a counterparty that covers/reduces the actual exposure and there is no field querying or rule limiting the type of collateral to be reported (without prejudice of rules on how to collateralise, or others outside the reporting section of EMIR and that may be applicable to certain counterparties).

 

(a2) There is only one collateral value field (Table 1, Field 25) and an associated currency field (Table 1, Field 26) on a report by a Counterparty. Therefore all collateral for a single portfolio should be reported in one single currency value. The reporting counterparty is free to decide which currency should be used as base currency as long as the base currency chosen is one of the major currencies which represents the greatest weight in the pool and is used consistently for the purpose of collateral reporting for a given portfolio.

 

(a3) Non-cash collateral should be reported as its current cash equivalent as evaluated at the moment of posting/amending the collateral.

 

(a4) Consistent with TR Answer 3b (a1) below, the collateral should be the sum of any initial margin (or similar) posted by the reporting counterparty and any variation margin (or similar) also posted by the reporting counterparty. Note that there is no obligation to report collateral received (to avoid double-counting) and therefore if the variation margin is flowing in the opposite direction to the initial margin, it would be the other counterparty that would have to report the variation margin on their report.

 

(a5) the collateral reported should be just the collateral that covers the exposure related to the reports made under EMIR. If it is impossible to distinguish within a pool of collateral the amount which relates to derivatives reportable under EMIR from the amount which relates to other transactions the collateral reported can be the actual collateral posted covering a wider set of transactions.

 

(a6) the collateral should be reported as the total market value that has been posted by the counterparty responsible for the report. The fact that certain types of collateral might take a couple of days to reach the other counterparty should be ignored. (b) The reporting start date is extended by 180 days for the reporting of information referred to in Article 3 of Regulation (EU) 148/2013, i.e. data on exposure. The corresponding fields in the table are the fields related to valuation and collateral (fields 17 to 26 of Table 1).

The resulting date is therefore 11 August 2014 with the first reports being due no later than the end of 12 August 2014 including the valuations and collateral as at the end of 11 August 2014.

 

(c) Valuation update (V) in field No. 58 refers to any change in fields 17 to 26 of table 1.

Therefore, changes in the amount of collateral should be reported as a (V) in field 58."

 

ESMA's EMIR Q&As version of 1 October 2015

 

 

 

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Last Updated on Sunday, 17 January 2016 22:27
 

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