“It’s just as well it was a soft launch, because if it had been a hard launch it would have been a disaster.”
That’s the verdict from one market insider as quoted in FTSE Global Markets which provides a comprehensive rundown of the recent problems of derivatives trade reporting under EMIR, the European market infrastructure regulation.
Having two-sided reporting and six trade repositories (TRs) authorised by ESMA, the European Securities and Markets Authority, has complicated matters. The US has one-sided reporting and one TR. The inclusion of exchange-traded derivatives and of reporting requirements for non-financial companies were late-in-the-day regulatory surprises, the publication said.
Another problem has been the issuing of legal entity identifiers (LEIs). Rob Friend, global business manager for FICC, Bloomberg, said: “No one really knows how many LEIs there should be or how many entities still require an LEI. It is quite possible many firms and corporates don’t realise they need to have an LEI.”
As for the matching of data, FTSE Global Markets says that, looking at the US Dodd-Frank experience, it could take up to a year to bed down before it can provide “optimal results for the regulator”.
From August, valuation and collateral information about OTC derivative contracts entered into since August 16th 2012 must also be included in the data. “This daily mark-to-market or mark-to-model information will provide insights and important market intelligence to regulators about the risk exposures of individual firms under their watch,” the publication says.
“The reason for trade reporting rules is so regulators can get access to trade data and how inter-linked exposures might be,” says Mark Croxon, Nomura’s global product manager for OTC clearing. “The next step is to see what regulators do with that data.”
Read the FTSE Global Markets article in full by clicking here.