|REMIT reporting - swaps|
|REMIT Reporting Database|
Firstly, there may arise an ambiguity on the overall problem who is the buyer and who is the seller in the swaps transactions.
This must be determined for the TRUM Data Field No (10) of the non-standard reporting form (containing the Buy/Sell indicator).
Generally, this field for a trade transaction should display the side of the matched trade for the market participant; a buyer or a seller, while for an order transaction, this field is intended to specify whether the market participant indicated to buy or sell the contract that the order transaction was placed on.
There are some situations where derivatives are not reported under EMIR, and therefore must be reported under REMIT. But how to fill in the REMIT reporting Buy/Sell indicator with respect to swaps? This requires a differentiation between fix to floating derivative and floating to floating one.
The TRUM gives an example, in case of a fix to floating derivative, if party (A) buys a swap, then party (A) pays a fixed price and party (B) pays a floating price.
This means that party (A) receives the floating leg and party (B) receives the fix leg.
In case of a floating to floating derivative, if party (A) buys a swap, party (A) pays the floating price of the first leg (or index) and party (B) pays the floating price of the second leg (or second index). In this case the two legs (indexes) of the swap should be sorted alphabetically.
For example, if party (A) and party (B) enter into a swap transaction where the financial settlement is the difference between two floating indexes "XYZ Index" and "ABC Index", (A) is the buyer of the swap if (A) pays the floating price of ABC Index and receives the floating price of XYZ Index while (B) is the seller of the swap as (B) receives the floating price of ABC Index and pays the floating price of XYZ Index.
How to establish the estimated notional amount for the swap transaction
The estimated notional amount needs to be indicated in the Data Field No (16) of the REMIT non-standard reporting form.
Overall, this field should be left blank for contracts that do not have a known price at the time of the trade. The same applies to any contracts which have a floating leg, e.g. gas/electricity financial swaps not reported under EMIR but reportable under REMIT.
TRUM gives the following example: in April, market participant (A) enters into an electricity financial swap contract for the month of July. Market participant (A) is the seller of the swap.
For the fixed leg, the forward price is known today but the spot price is not known until the end of July. In this case, this field should be left blank.
Option on swap
Swaps need also to be specifically accounted for in the Data Field No (31) of the non-standard reporting form containing the designation for the settlement method i.e. whether the traded contract is settled physically, in cash, both, optional or other.
Accepted values for this field are P=Physical C=Cash O=Optional for counterparty, as follows:
"P" is indicated if the contract is settled physically and
For options on swaps the value "P" is appropriate as explained in the following passage of the TRUM: "[f]or contract such as option on futures or swaps, as they settle into the underlying future or swap, this should be considered for physical delivery of the underlying contract and the value of "P" should be reported."
ACER's Frequently Asked Questions (FAQs) on REMIT transaction reporting, Questions 3.1.35, 2.3.10
|Last Updated on Tuesday, 22 August 2017 11:05|