Too little too late

Last night the European Securities and Markets Authority (ESMA) published its latest set of European Market Infrastructure Regulation (EMIR) Questions and Answers. Despite offering a little more clarity and guidance around the implementation of today’s trade reporting mandate, this was arguably too little too late.

It’s clear from all of today’s commotion that many institutions are still struggling to compile and submit compliant trade reports, and it’s evident that much uncertainty remains around what should and shouldn’t be reported, and what constitutes a compliant trade report. Furthermore, confusion around the backloading of trades is also causing some issues.

To clarify, guidelines for the backloading of trades are as follows:

• Trades that were executed before the 16th of August 2012 and are still open today (12th of February 2014) must be reported within 90 days
• Derivatives contracts that closed prior to today’s trade reporting deadline must be reported within three years
• Any trades executed after the 16th of August 2012 that remain open today must be reported immediately

EMIR has been plagued by confusion and uncertainty from the offset, and many firms have delayed the implementation of their trade reporting solutions in the hope of gaining some sort of clarity on the exact scope and requirements of the mandate. Unfortunately, this clarity never came. Some firms are still even unsure if they need to report at all, and are unaware of the steps they need to take to do so. The simple diagram below could help hard-pressed operations people decide on the correct course of action, but it is by no means exhaustive.

The culmination of all this uncertainty is that many firms are now scrambling to compile and submit trade reports, having left it too late to implement an adequate solution and set up the necessary documentation and agreements in time for the deadline. 

Clearly, this delayed response by some firms has also caused significant issues for trade repositories. Even today, many trade repositories are struggling to onboard clients who were late to register, and this is having a knock on effect on the quality of service they are able to provide, even to those who registered ahead of their respective deadlines. In extreme cases, clients have even found themselves unable to access their chosen trade repository’s systems, despite having already completed the onboarding process.

In light of all of this, it’s safe to say that ESMA’s latest set of EMIR Questions and Answers will be of little comfort / use to those who are now struggling to comply with the trade reporting mandate.