It is fair to say that the first month of EMIR reporting has not exactly gone smoothly. Some Trade Repositories (TR) are still struggling with on-boarding and data issues, inter-TR reconciliation is not yet close to being fully up and running, and whilst nobody is happy to share exact numbers, pairing rate are probably well below the 30% mark.

The experience so far and the very little progress that has been made by the industry to address the issues that have arisen would seem to point towards the hopeful outcome that ESMA would push back the compliance deadline, look at the outstanding issues and work with the industry to implement “EMIR 2.0” at a future date, however this is unlikely to happen.

Whilst the best position a buy-side firm can hope to be in at the moment is to be self-reporting daily and receive acknowledgements, or have faith that their counterparties are reporting accurately on their behalf, but not much more for now.

We should remind ourselves that in essence the regulatory obligation is both to report eligible transactions, and to reconcile that submitted transactions and positions are accurate, and where appropriate matched with the counterparties transaction. Firms are obligated to inform the Local Regulatory Authority of any issues with the submitted information, something which at the moment is incredibly difficult or near impossible.

Aside from the teething issues, firms face three other major issues:

1. Many firms do not have the data model internally to support the information required by the regulations, either for reporting or reconciliation purposes.
2. For firms trading in synthetic instruments (i.e. CFD’s, Portfolio Swaps), which are in essence a customised and varied offering by each Prime Broker, their reporting and reconciliation solution needs to handle the different way in which they will generate UTI’s and report transaction to the TR’s
3. For ETD’s and for firms that trade synthetics and are highly strategized, the shapes in which trades are booked and allocated internally are unlikely to mirror the sell-side, leading to pairing issues at the Trade Repositories and therefore further reconciliation issues.

Considering the challenges involved, buy-side firms have to been seen to be working towards having the capability and flexibility to verify the information supplied to the regulator, and respond to any changes that are likely to occur in the coming weeks and months.