EMIR trade reporting: The race to comply

The media is awash with speculation on the preparedness (or indeed, lack of preparedness) of buyside firms for European Market Infrastructure Regulation (EMIR). With the EMIR trade repository authorisation deadline on the 7th of November looming, we’ve spoken to a number of our contacts at leading buyside firms to establish whether or not this is really the case. Our conversations have revealed that most buyside firms are actually in the process of implementing compliance initiatives, which is contrary to much of what is said in the mass media. However, we have found that some buyside compliance initiatives are based on false assumptions, and fail to fully address many of the key areas impacted by the new regulations. In particular, the trade reporting obligation seems to be causing some confusion.

Whilst firms are able to delegate the trade reporting function under EMIR, it is important that buyside organisations remember that they will still be held legally accountable for the accuracy of the reports submitted. In practical terms, this means that they will need to be able to quickly access, verify and amend any reports submitted on their behalf. Worryingly, a number of the firms we spoke to regarding the upcoming deadlines were under the impression that they will be exempt from the new trade reporting requirements due to the small volume and / or nature of trades executed. This simply isn’t the case.

If on Thursday the first trade repositories are authorised according to schedule, then firms will have 90 days to ensure that they are fully compliant with EMIR trade reporting requirements. Firms that haven’t yet formulated a strategy for this, will struggle to implement a solution within this tight timeframe.

Although it is good news for the market generally that all parties are moving on with their compliance projects, there is still a lot of work to be done. Current opinion is that the deadline for the implementation of trade reporting will apply to both OTC and ETD derivatives. Ensuring that the correct infrastructure is in place to support these requirements is no small task. Whether or not the implementation date (currently February 2014) is delayed (again), firms need to ensure that their compliance initiatives cover all impacted areas and are implemented in a robust and timely manner.

Should the first trade repository/ies be authorised on the 7th of November, then a race to comply with EMIR trade reporting requirements would ensue. Firms must be ready to spring into action should this occur as those that fail to cross the finish line by this date could find themselves falling foul of the regulators. Even if there is another delay, there is no doubt that the race will take place and participants should be prepared to line up at the starting blocks.

The stakes are high, so buyside: On your marks, get set, comply!