|ESMA's trouble with ETDs' reporting|
|Monday, 12 August 2013 06:59|
Deadlines for EMIR reporting for exchange-traded derivatives (ETDs) will likely be extended by 1 January 2015.
The EMIR reporting obligation covers all derivative contracts (it doesn't matter OTC or exchange-traded (ETD)). The said rule is expressed literally by Article 9 of EMIR, which stipulates that financial and non-financial counterparties must ensure that the details of the said derivative contracts they have concluded and of any modification or termination are reported to a registered or recognised trade repository.
According to Article 5 of the Commission Implementing Regulation (EU) 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 according to Regulation (EU) No 648/2012 (ITS), derivatives contracts must be reported by financial and non-financial counterparties 90 days following the registration of a trade repository for the relevant asset class.
EMIR (Article 9) and MiFID (Article 25 of Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council on Markets in Financial Instruments) taken together require that transactions on derivatives admitted to trading to a regulated market are subject to both reporting under MiFID (direct reporting to competent authorities) and under EMIR (reporting to trade repositories for the purpose of making the data available to the relevant authorities in accordance with their regulatory needs).
The above dual reporting chanels notwithstanding, the legal and organisational problem that has already arisen on the ground of the recently-adopted ITS is that the said implementing provisions do not distinguish between the dates of application of the reporting obligation with respect to ETDs and OTC derivatives.
Moreover, delineating the personal scope of entities subject to the ETDs reporting obligation is involved with difficulties.
ESMA observed that under MiFID all investment firms executing a transaction in a regulated market are subject to the reporting obligation while, depending on the different scenarios in which the transaction may be executed on the exchange, it is not always evident to identify who the counterparty of the transaction is for the purpose of EMIR reporting.
If the same transaction is considered from the perspective of the regulated market, the market participant (i.e. the executing broker) could be considered the counterparty of a transaction executed in the market, if it is considered from the perspective of the CCP, the clearing member can be considered the counterparty, if it is considered from the perspective of the moment of execution, it will be the firm transmitting the order to the executing broker to be considered the counterparty. From the identification of the counterparty of a transaction derives the obligation to report under EMIR, so this matter affects compliance with the Regulation.
For the above reasons ESMA has proposed draft Commission Implementing Regulation amending Commission Implementing Regulation (EU) 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 according to Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories recommending to postpone reporting deadline for ETDs, which technically will be executed by the addition in Article 5 of the Commission Implementing Regulation (EU) No 1247/2012 the paragraph 6 (stating that derivative contracts which are subject to the rules of a trading venue and are executed in compliance with those rules, including the processing by the trading venue after execution and the clearing by a CCP within one working day of execution, should be reported to a trade repository by 1 January 2015).