operating in Europe are subject to new swap reporting requirements starting
February 12 that, until recently, were confined to financial institutions. Many
EU-based treasurers are unaware of the European Market Infrastructure
Regulation, or EMIR, a fact acknowledged by the European Securities and Market
Authority (ESMA), the regulatory body overseeing the new rule. Even so, ESMA
has shown no sign of postponing the start date.
Under EMIR, over-the-counter
and listed derivatives transactions are subject to reporting with trade repositories
and OTC contracts must be cleared under central clearing counterparties except
for those that were not outstanding before August 16, 2012, the initial effective
start date of the law.
similar to that of its U.S. regulatory counterpart, the Dodd-Frank Act, but
with certain differences obligated to end-users:
distinguishes between swap counterparties that are either financial (FC) or
nonfinancial entities (NFC). FCs can include financial institutions, investment
banks, insurance companies, hedge or pension funds established in Europe. Once
recognized as an NFC, end-user obligations depend on the clearing threshold and
intent of the derivatives contract itself.
requires that both parties to a transaction report, unless they agree to have one
party report on behalf of both. If end-users choose not to arrange for their
counterparty or third-party service to report on their behalf, they must prepare
their trades by tagging them under the unique-trade-identifier (UTI) for
reporting with trade repositories and register under the global
legal-entity-identifier (LEI) system. In contrast, Dodd-Frank requires only one
party within a given transaction to report the contract—typically, the broker-dealer.
In a poll of
more than 200 corporates by financial risk advisory firm Chatham Financial, 52
percent admitted they were unsure if their organizations were obligated to
report under EMIR. Fully 59 percent said they are still preparing for EMIR
reporting compliance, while just 4 percent said they completed all necessary compliance
steps. In addition, more than a third (35 percent) have yet to decide which
reporting option they will use, and only 18 percent plan to report trades
interview with FX Week¸ Rodrigo
Buenaventura, head of the markets division at ESMA, said it should come as no
surprise that industry participants are unprepared. However, with 13 months to get ready, “it's anyone's guess what will happen when the date comes around,” he said.