FOA calls for harmony on listed derivatives reporting rules
Trade body the
Futures and Options Association (FOA) has raised concerns with UK and Italian
regulators on potentially burdensome regulatory requirements for reporting
listed derivatives trades.
The issue relates
to article nine of the European market infrastructure regulation (EMIR),
Europe’s blueprint for OTC derivatives reform, which obligates trade
counterparts – both buy- and sell-side firms – and central counterparties
(CCPs) to report derivatives trades to newly-created data repositories.
The FOA and a
number of its members are concerned about the potential for duplicative
Firms will be
able to meet their regulatory reporting obligations through the trade repository rules
under EMIR, but this will not be the case until the finalisation of new
transaction reporting rules in MiFIR, the regulation accompanying MiFID II.
With MiFID II at least two years behind EMIR – which
will be implemented in early 2013 – firms may need to report derivatives trades
both to regulators and trade repositories until the new rules are finalised, in
particular where a trade repository is not also an Approved Reporting
is a pressing need for the European Securities and Markets Authority (ESMA) to
ensure there is harmonisation between the reporting standards in EMIR and the
current and future transaction reporting regimes,” Blake Stephenson, manager, regulation at the FOA,
told theTRADEnews.com. “This requires some detailed preparatory work before issuing a
consultation paper, which is expected later this month.”
ESMA is expected
to unveil detailed technical standards for EMIR on 25 June for a six-to-eight
week consultation. The securities watchdog will then need to present its final
technical standards to the European Commission in September, for final
publication by the end of this year.
There are also
technical changes to the way listed derivatives are reported that will need to
be considered by the industry, including an increase in the number of data
fields required when reporting – 27 under current transaction reporting
requirements, rising to 90 under EMIR’s trade repository obligation – and new
rules that mean FX and commodity derivatives, as well as trade beneficiaries,
must be identified.
Within the last
two weeks, the FOA has met with UK watchdog the Financial Services Authority and
Italian regulator CONSOB to discuss the issues.
assume that the obligation is easier for exchange-traded derivatives because
the reporting can be passed through to third parties such as CCPs and the
exchanges,” said Stephenson. “The feeling is that it perhaps isn’t quite as
simple as that in practice.”
Buy-side firms so
far appear to have focused much of their efforts on OTC derivatives that will
be traded on exchange-like platforms and centrally cleared when EMIR takes effect.
“Our review of the impact EMIR
will have on our business has so far mainly been focused on changes affecting
OTC derivatives trading,” said Paul Squires, head of trading at AXA Investment
Managers. “We will soon look more closely at any impact of the regulation on
listed derivatives, including transaction reporting."