Trade repositories face concerns over Brexit and EMIR, warns experts
07 October 2020 Frankfurt
Image: GoodIdeas / Adobestock.com
Trade repositories (TR) are scrambling to onboard former-CME clients in time for the November deadline while also juggling the challenges of Brexit and an update to the European Market Infrastructure Regulation, known as EMIR Refit.
The remaining EU TRs are welcoming CME’s clients as fast as possible but industry experts fear that a bolstered roster of customers may not be enough to shield the community from the challenges ahead, such as EMIR Refit which threatens to complicate reporting rules.
The purpose of Refit is to address disproportionate compliance costs, transparency issues and insufficient access to clearing for certain counterparties. Its aim is to simplify the rules and reduce regulatory and administrative burdens where possible, especially for non-financial counterparts (NFCs), without compromising the regulatory goal of EMIR.
As of 18 June, responsibility for reporting OTC derivatives trades under EMIR was handed to FCs on behalf of their NFCs that are deemed NFC- under regulation’s new designations.
The NFC needs to confirm whether it intends to self-report to prevent the risk of double reporting, or a failure to report by either party. Flaws in the data transfer methods and general shortcomings in the average level of communication between NFCs and FCs means that this system is expected to lead to issues with duplicated reporting.
REGIS-TR’s head of business development Nick Bruce says this will create a “perfect storm” that will bring an unprecedented amount of activity and movement to a market that isn’t built to support that number of clients or the volume of trades.
Elsewhere, Brexit is also throwing up barriers. From January 2021, UK entities will no longer be legally obligated to report to ESMA, although they will still be subject to EU rules for any of their EU-related business.
Maciej Trybuchowski, CEO of the Polish TR and central securities depository KDPW, predicts that Brexit will inflate reporting costs for clients who operate on both sides of the border.
To defang the challenge, most UK trade repositories are setting up operations in EU27, and vice versa.
This extract is from ‘What’s next on the horizon for trade repositories?’ which can be read in full here.
The remaining EU TRs are welcoming CME’s clients as fast as possible but industry experts fear that a bolstered roster of customers may not be enough to shield the community from the challenges ahead, such as EMIR Refit which threatens to complicate reporting rules.
The purpose of Refit is to address disproportionate compliance costs, transparency issues and insufficient access to clearing for certain counterparties. Its aim is to simplify the rules and reduce regulatory and administrative burdens where possible, especially for non-financial counterparts (NFCs), without compromising the regulatory goal of EMIR.
As of 18 June, responsibility for reporting OTC derivatives trades under EMIR was handed to FCs on behalf of their NFCs that are deemed NFC- under regulation’s new designations.
The NFC needs to confirm whether it intends to self-report to prevent the risk of double reporting, or a failure to report by either party. Flaws in the data transfer methods and general shortcomings in the average level of communication between NFCs and FCs means that this system is expected to lead to issues with duplicated reporting.
REGIS-TR’s head of business development Nick Bruce says this will create a “perfect storm” that will bring an unprecedented amount of activity and movement to a market that isn’t built to support that number of clients or the volume of trades.
Elsewhere, Brexit is also throwing up barriers. From January 2021, UK entities will no longer be legally obligated to report to ESMA, although they will still be subject to EU rules for any of their EU-related business.
Maciej Trybuchowski, CEO of the Polish TR and central securities depository KDPW, predicts that Brexit will inflate reporting costs for clients who operate on both sides of the border.
To defang the challenge, most UK trade repositories are setting up operations in EU27, and vice versa.
This extract is from ‘What’s next on the horizon for trade repositories?’ which can be read in full here.
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