CCP-cleared trades terminated - not modified (in EMIR reports)
Tuesday, 24 November 2015 06:45

 

Where an existing contract is subsequently cleared by a CCP, it mustn't be reported under EMIR to the trade repository as a modification of the existing contract, but the original contract should be flagged as terminated and the new contract resulting from clearing should be reported.

 

This is the essence of ESMA's recent draft amendments with respect to EMIR reporting of derivatives subject to clearing.

 

It will be also expressly stipulated by the law that when a contract is concluded in a trading venue and cleared on the day of execution, only its cleared form will be reported.

 

 

Firms should prepare for approaching modifications regarding EMIR derivatives' reporting rules, particularly those involving transactions cleared by a CCP.

 

Actual framework in Article 2 of the 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) foresees that where an existing contract is subsequently cleared by a CCP, clearing should be reported as a modification of the existing contract.

 

Moreover, if a contract is concluded in a trading venue and cleared by a CCP such that a counterparty is not aware of the identity of the other counterparty, the reporting counterparty should identify that CCP as its counterparty.

 

This setup will change, if the amendments proposed by the Paris-based European Securites and Markets Authority (ESMA) are included by the European Commission into binding EMIR derivatives reporting framework.

 

The 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)), differently than the actual rules, stipulates that where an existing contract is subsequently cleared by a CCP, the original contract should be reported as terminated and the new contract resulting from clearing should be reported. 

 

Additionally, where a contract is concluded in a trading venue and cleared on the day of execution, only its cleared form will be required to be reported.

 

It was also underlined (Recital 2 To the draft Regulation) that a central counterparty acts as a party to a derivative contract.

 

 

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)

 

Article 2
Cleared trades
1. Where an existing contract is subsequently cleared by a CCP, clearing should be reported as a modification of the existing contract.
2. Where a contract is concluded in a trading venue and cleared by a CCP such that a counterparty is not aware of the identity of the other counterparty, the reporting counterparty shall identify that CCP as its counterparty.

 

 

 

 

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))

 

Recital 2

It is important to also acknowledge that a central counterparty acts as a party to a derivative contract. Accordingly, where an existing contract is subsequently cleared by a CCP, it should be reported as terminated and the new contract resulting from clearing should be reported.

 

Article 2
Cleared trades
1. Where an existing contract is subsequently cleared by a CCP, the original contract shall be reported as terminated and the new contract resulting from clearing shall be reported.
2. Where a contract is concluded in a trading venue and cleared on the day of execution, only its cleared form shall be reported.

  

 

 

 

 

Comments (1)
1 Thursday, 14 January 2016 08:52
vijay HONNUNGAR
Very well articulated; thanks for taking initiative spreading know-how and recent happenings with regulatory framework.
Cheers!

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