The launch of derivatives trades reporting to trade repositories under EMIR, the European market infrastructure regulation, has gone “reasonably well”, according to the responsible regulator, ESMA, the European Securities and Markets Authority.
But Verena Ross (pictured), executive director of ESMA, admitted in a speech earlier this week to the Association for Financial Markets in Europe conference on liquidity that there were still “numerous issues to be solved”, such as: onboarding of reporting entities; identification of the legal entity identifier (LEI); ensuring harmonisation of codes; and improving data quality.
Ross explained that ESMA has provided guidance about how to “populate” reports on three separate occasions in the last few months and that it is working on additional initiatives. “As we have seen in other jurisdictions, that started off with reporting earlier than us, it takes some time to have a system of this size and complexity running smoothly and providing top quality data for supervisors at a global level,” she said. “But we are well on the way and the goal is worth the effort.”
“I am sure that the competent authorities that have the power to enforce non-compliance on reporting parties at national level, are conscious of the limitations and the sheer scale of such a big project and are working with the supervised entities and ESMA to improve their reporting quality in the shortest possible time period.”
More than just “a few tweaks”?
Ross’s comments echo – but in a more restrained fashion – the views published recently by industry magazine Banking Technology. It said that trade repositories reported “a largely smooth transition” on 12 February, the first day of reporting. “On the surface, all seemed to go well,” it said.
David Peniket, executive director of ICE Trade Vault Europe, which processed around 4.5 million trades on the first day of reporting, told the publication: “The first day of reporting occurred seamlessly.”
But Banking Technology noted criticism of ESMA’s decision to publish a new Q&A document just the day before trade reporting began, amid claims that the authorities had “rushed” the deadline. “Firms are now scrambling to work out the deltas to their business requirements specifications for how a trade is uniquely identified, what code to use to classify the product and ascertain how frequently multi-leg transaction reporting is required,” PJ di Giammarino, founder and chief executive of financial services think-tank JWG, wrote in a blog post. “Sound like a few tweaks? We think not. The reality is that the reporting is riddled with deep rooted problems.”
Verena Ross's speech is available by clicking here:
Banking Technology's article is available by clicking here