Reporting obligation(under art. 9 of EMIR)
Who should report under EMIR?
EMIR establishes the reporting obligation on both counterparties that should report the details of the derivative trades to one of the trade repositories (TRs), i.e. the buying party should report and the selling party should report. This obligation covers both financial and non-financial counterparties. Only the individuals are exempted from the obligation to report their derivatives trades. However as their counterparty is usually a financial institution, the latter has the obligation to report those trades.
EMIR uses the term “non-financial counterparty” which covers all other counterparties that cannot be qualified as a financial counterparty. EMIR sets obligations and requirements applicable to the non-financial counterparties that enter into derivative contracts thus expanding the coverage of the regulation.
What should be reported under EMIR?
EMIR requires reporting of the transaction details for both types of derivatives trades – exchange traded derivatives (ETD) and OTC derivatives. ‘OTC derivative’ or ‘OTC derivative contract’ (under Article 2 of EMIR) is a derivative contract the execution of which does not take place on a regulated market or on a third- country market considered as equivalent to a regulated market. For example, the derivative contracts traded on MTFs (multilateral trading facilities) are OTC derivatives in the context of EMIR. The exchange traded derivatives (EDT) are not explicitly defined under EMIR.
From legal point of view the scope of the financial instruments covered by EMIR are set out in Annex I, Section C, points (4) to (10) of MiFID (EU Directive 2004/39EC):
4) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash;
(5) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);
(6) Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF;
(7) Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in C.6 and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls;
(8) Derivative instruments for the transfer of credit risk;
(9) Financial contracts for differences.
(10) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Section, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls.
Guidance for points 6 and 7 (commodities that can be physically settled) are available here.
Please note that EMIR does not cover the following:
(1) Transferable securities;
(2) Money-market instruments;
(3) Units in collective investment undertakings.
From practical point of view the minimum required information to be reported is separated into two main categories:
- Counterparty data: name, domicile, ID of the counterparty (set out in the Annex I, Table 1, Commission Delegated Regulation (EU) No 148/2013 of 19 December 2012);
- Common data: type of contract; maturity; notional value; quantity; settlement date, etc. (set out in the Annex I, Table 2, Commission Delegated Regulation (EU) No 148/2013 of 19 December 2012).
To whom should be reported?
All OTC derivative contracts and exchange traded derivatives should be reported to one of the registered trade repositories.
Please find below a list with the trade repositories that have been registered by ESMA:
|Trade Repository||Derivative asset class||Effective date|
|DTCC Derivatives Repository Ltd. (DDRL)||All asset classes||14/11/2013|
|Krajowy Depozyt Papierów Wartosciowych S.A. (KDPW)||All asset classes||14/11/2013|
|Regis- TR S.A.||All asset classes||14/11/2013|
|UnaVista Ltd.||All asset classes||14/11/2013|
|CME Trade Repository Ltd. (CME TR)||All asset classes||05/12/2013|
|ICE Trade Vault Europe Ltd. (ICE TVELL)||Commodities, credit, equities, interest rates||05/12/2013|
How the derivatives can be reported?
In order to assist you finding the best solution for your EMIR reporting we can perform an evaluation of the IT infrastructure of the company as well as available the resources and the type of the instruments and the number of trades that should be reported.
We can suggest the best cost effective option for your EMIR reporting solution.
Generally there are three main options:
- Direct reporting to the TR: establishment of procedures, usage of plugins and template files that will be available to your company, as well as assistance in choosing the best cost effective trade repository (TR) in the context of the number of trades that are or should be reported.
- Delegated reporting to a counterparty: analysis of the options about your counterparties to report on your behalf, i.e. the number and type of the counterparties that can take over the EMIR reporting functions for certain transactions that go through them.
- Delegated reporting to a third party solution: analysis and pointing out a third party solution in the context of cost-efficiency and implementation advantages.
EMIR Reporting Ready, Ltd. has established strong relations with third party solutions companies whose IT infrastructure can be used in order to establish a smooth EMIR reporting process. For further information please click here for our Solutions.
What is LEI?
LEI stands for Legal Entity Identifier. It is a unique sequence of numbers and letters that identifies the counterparties, CCPs, beneficiaries and brokers. The information about the LEIs of all your partners and clients (legal entities) is essential for successful transaction reporting.
What is UTI?
UTI stands for Unique Trade Identifier. It identifies a specific trade and is generated under certain rules provided by ESMA. Before reporting the counterparties should agree on which form of unique trade identifier they will use. This is required in order to ensure accurate identification of reported trades by both counterparties. This was established in order to improve the ability to reconcile trades both with and between counterparties, CCPs and trade repositories, and reduce the likelihood of duplicate reporting. However, due to the low pairing rates of the trade repository reconciliation process, ESMA has tightened up the requirements about UTI generation and usage. With the new EMIR RTS and ITS that apply on 1st Nov 2017 UTI sharing and strict rules for UTI generation are established.
What are the deadlines?
Since 12th of Feb 2014 there is an obligation to report the derivative transactions. The deadline to report the transaction is the day after the transaction was executed, i.e. T+1. The deadline for reporting back-dated transactions, i.e. back-loading is 90 days after the obligation to start the reporting. In case the derivative contracts are not outstanding in 12th of Feb, 2014, however are outstanding between 16th of Aug 2012 and 12th of Feb, 2014, the deadline to report them to TR was 3 years. However with the new EMIR RTS/ITS the deadline was extended with 2 more years (overall 5 years).
When to start collateral and valuation reporting?
Since 12th August 2014, EMIR requires that financial counterparties (FC) and non-financial counterparties above the clearing threshold (NFC+) report on a daily basis the collateral and valuation data relating to their open trades and positions to an ESMA authorised trade repository. This data relates to the Counterparty Data fields 17 to 26 inclusive, which consists of five fields of Valuation data and a further five of Collateral data. The legal grounds are outlined in the following key sources:
- EMIR Art. 9
- EMIR RTS 148/2013 (Article 3 on reporting exposure)
- EMIR ITS 1247/2013 (Article 5 and Annex 1 which sets out the data fields and delay for reporting exposures)
- ESMA Q&A TR Question 3 – details on reporting collateral and valuation
What additional data to be reported on and after 12th August 2014?
The additional information regarding collateral and valuation is provided in the EMIR table 1, Counterparty Data, fields 17 to 26. Please refer to the table below.
|EMIR Field||Counterparty Data Field Description|
|17||Mark to Market Value of Contract||Mark to market valuation of the contract, or mark to model valuation where applicable under Article 11(2) of Regulation (EU) No 648/2012.|
|18||Currency of mark to market value of the contract||The currency used for the mark to market valuation of the contract, or mark to model valuation where applicable under Article 11(2) of Regulation (EU) No 648/2012.|
|19||Valuation Date||Date of the last mark to market or mark to model valuation. The valuation should be performed on a daily basis.|
|20||Valuation Time||Time of the last mark to market or mark to model valuation.|
|21||Valuation Type||Indicate whether valuation was performed mark to market or mark to model.|
|22||Collateralisation||Whether collateralisation was performed. Options: Uncollateralised; One-way Collateralised; Partially collateralized; Fully Collateralised.|
|23||Collateral Portfolio||Whether the collateralisation was performed on a portfolio basis. Portfolio means the collateral calculated on the basis of net positions resulting from a set of contracts, rather than per trade.|
|24||Collateral Portfolio Code||If collateral is reported on a portfolio basis, the portfolio should be identified by a unique code determined by the reporting counterparty.|
|25||Value of the Collateral||Value of the collateral posted by the reporting counterparty to the other counterparty. Where collateral is posted on a portfolio basis, this field should include the value of all collateral posted for the portfolio.|
|26||Currency of the Collateral Value||Specify the value of the collateral for field 25.|
How to calculate the mark-to-market value?
ESMA requires that the primary valuation methodology which should be used is mark-to-market. Only where mark-to-market is not feasible (for example due to a market being ‘inactive’), then “reliable and prudent” marking-to-model may be used to value trades and positions. The relevant EMIR regulation (No 149/2013) also requires the reporting counterparty to take steps to review and document the use of an appropriate model, which may require the counterparty to obtain appropriate internal approvals and liaise with other counterparties.
For centrally cleared contracts, the valuations reported by each counterparty should be those calculated by the CCP, on a daily basis, at а position level. This does not mean that the report should always be made by the CCP. The CCP may make data available to the counterparties, so that the latter can report.
For uncleared business, the contracts should be valued by the counterparties themselves.
The counterparties are subject to the requirement to daily mark-to-market/mark-to-model the valuation of the reported transactions. The changes in mark-to-market or mark-to-model valuations on already reported transactions need to be reported on a daily basis (end of day).
The mark-to-market value should be based on the End of Day settlement price of the market (or the CCP) from which the prices are taken as reference. If an End of Day settlement price is not available, then the mark-to-market value should be based on the closing mid-price of the market concerned.
The mark-to-market value should represent the absolute value of the contract.
Should the valuation reported be agreed between the counterparties?
As the valuation is part of the Counterparty data fields, in the case of derivative not cleared by a CCP, the counterparties do not need to agree on the valuation reported.
How to calculate the value of the collateral?
The collateral should be the sum of any initial margin (or similar) posted by the reporting counterparty and any variation margin (or similar) also posted by the reporting counterparty. There is no obligation to report collateral received by the reporting counterparty (to avoid double-counting) and for that reason if the variation margin is flowing in the opposite direction to the initial margin, it would be the other counterparty that would have to report the variation margin on their report. Collateral can be reported on a portfolio basis and should be reported at the total market value that has been posted by the counterparty responsible for the report. Any haircuts or similar used by the receiver of the collateral and any fees or similar amounts should all be ignored. Furthermore the fact that certain types of collateral might take a couple of days to reach the other counterparty should also be ignored. Non-cash collateral should also be reported as its current cash equivalent that was evaluated at the moment of posting/amending the collateral.
As specified in Article 3 of Commission Delegated Regulation (EU) No 148/2013 (RTS on reporting to TR), collateral can be reported on a portfolio basis. This means the reporting of each single executed transaction should not include all the fields related to collateral, to the extent that each single transaction is assigned to a specific portfolio and the relevant information on the portfolio is reported on a daily basis (end of day).
Currently there is no field that specifies the type of collateral. Since 1st Nov 2017 different fields related to the different types of collaterals will be introduced. At the moment field 22 on collateralisation refers to any collateral posted by a counterparty that covers/reduces the actual exposure and there is no field querying or rule limiting the type of collateral to be reported (without prejudice of rules on how to collateralise, or others outside the reporting section of EMIR and that may be applicable to certain counterparties).
A collateral portfolio with multiple currencies should be normalised to the base currency because currently there is only one collateral value field (Table 1, Field 25) and one associated currency field (Table 1, Field 26) on a report by a Counterparty. Therefore all collateral for a single portfolio should be reported in one single currency value. The reporting counterparty is free to decide which currency should be used as base currency as long as the base currency chosen is one of the major currencies which represents the greatest weight in the pool and is used consistently for the purpose of collateral reporting for a given portfolio.
Non-cash collateral should be reported as its current cash equivalent as evaluated at the moment of posting/amending the collateral.
The collateral should be the sum of any initial margin (or similar) posted by the reporting counterparty and any variation margin (or similar) also posted by the reporting counterparty. Please note that currently there is no obligation to report collateral received (to avoid double-counting) and therefore if the variation margin is flowing in the opposite direction to the initial margin, it would be the other counterparty that would have to report the variation margin on their report.
After 1st Nov 2017 according to Commission Delegated Regulation (EU) 2017/104 (revised EMIR RTS) all posted and received collateral should be reported. The fields that specify the type of the collateral will increase from 1 to 6 different fields: initial margin posted; variation margin posted; initial margin received; variation margin received; excess collateral posted; excess collateral received.
In case the collateral agreement allows the covering of exposures in transactions that are not reportable under EMIR, the value of the collateral reported should be just the collateral that covers the exposure related to the reports made under EMIR. If it is impossible to distinguish within a pool of collateral the amount which relates to derivatives reportable under EMIR from the amount which relates to other transactions the collateral reported can be the actual collateral posted covering a wider set of transactions.
Which currency to be used as the collateral base currency?
ESMA advises All collateral for a single portfolio should be reported in one single currency value. The reporting counterparty is free to decide which currency should be used as a base currency as long as this base currency is one of the major currencies and is used consistently for the purpose of collateral reporting for a given portfolio.
How the change in the amount of collateral should be reported?
Valuation update (V) in field No. 58 refers to any change in fields 17 to 26 of table 1 and for that reason changes in the amount of the collateral should be reported as a (V) in field 58.
What does “Uncollateralised” mean?
A derivative contract shall be described as “Uncollateralised” when the reporting counterparty to such derivative contract is not posting any collateral (neither initial margin nor variation margin) at any time (as per ESMA Q&A in TR Question 33, regarding field 22).
What does “One-Way Collateralised” mean?
A derivative contract shall be described as “One-way Collateralised” when the agreement between the counterparties states that only the reporting party to such derivative contract agrees to post initial margin, regularly post variation margin or both with respect to the derivative contract.
What does “Partially Collateralised” mean?
A derivative contract shall be described as “Partially collateralised” when the agreement between the counterparties states that either one of both counterparties will regularly post variation margin and either they do not exchange initial margin at all or only the reporting counterparty receives initial margin.
What does “Fully Collateralised” mean?
A derivative contract shall be described as “Fully Collateralised” when the agreement between the counterparties states that initial margin must be posted and variation margin must regularly be posted by both counterparties.
Should the collateral details be reported at the trade, position or portfolio level?
Collateral should be reported at the same level at which it has been posted. If collateral has been posted against a portfolio of trades or positions, for example, then the details should be reported at the portfolio level.
What are the changes in RTS since Nov 2017?
On 21 January 2017 the revised RTS and ITS have been published in the Official Journal. They enter into force on 10 February 2017 and shall apply from 1 November 2017.
Commission Delegated Regulation (EU) 2017/104 introduces the following amendments to the EMIR RTS:
- New rules on the reporting of a contract composed of a combination of several other derivative contracts. In case the fields in the report do not allow reporting of a complex products by a single line, then the counterparties should decompose the contract and agree on the number of lines (with separate UTIs) that should be submitted. The transaction reports should be identified by using the new field ‘Complex Trade Component ID’ for any transaction reports resulting from the same derivative contract.
- New rules on the reporting of a previously reported contract which is subsequently cleared by a CCP. The existing contracts shall be reported as terminated and the new contracts resulting from the transaction shall be reported. For contracts concluded and cleared on the same date, only the cleared contract shall be reported.
- New rules for the reporting of collateral exchanged by the counterparties, including specifying what exactly should be reported, by whom, and how it should be valued.
- Rules for the reporting of the notional amount for different classes of derivatives. For swaps, futures and forwards (traded in monetary units) the notional amount should be the reference amount from which the contractual payments are determined in derivatives markets. For options the notional amount should be calculated using the strike price. Financial CFDs and commodities denominated in units (like barrels or tons) – the resulting amount of the quantity at the relevant price set in the contract.
- A new section of asset class specific fields for credit default swaps (CDS) with 10 fields and other new or renamed fields.
- More fields are included to correctly reflect the different types of collaterals: initial margin posted; variation margin posted; initial margin received; variation margin received; excess collateral posted; excess collateral received and the relevant fields that identify the currency of the new types of the margin fields.
- More new fields like: “Level” to indicate whether the reporting is done on a trade level or a position level, etc.
Commission Implementing Regulation (EU) 2017/105 covers the following amendments in EMIR ITS:
- Rules for clearly identifying the counterparty side depending on the different asset classes.
- Identification and classification of the derivatives. The ETDs will be identified by ISIN or AII. The OTC derivative contracts will be identified by their types. Two more categories are added: ‘SB’ for spread bet and ‘ST’ for swapton.
- Unique Trade Identifier (UTI). The UTIs of the cleared trades should be generated by the CCPs. For centrally-executed bit not centrally cleared trades the UTI shall be generated by the trading venue. For centrally confirmed and cleared trades the UTI generation obligation is placed to the clearing member. For trades that were centrally confirmed by electronic means but were not centrally cleared the UTI should be generated by the trade confirmation platform at the point of confirmation. Financial counterparties (FC) trading with non-financial counterparties – the FCs. For all other cases – the seller is responsible to generate the UTI and communicate it to the buyer. The UTIs should be generated and communicated in a timely manner so that the other counterparty can meet its reporting obligations.
- Clear rules about identifying the venue of execution.
- Extending the deadline for backloading from 12 February 2017 to 12 February 2019.
For further information and clarification please feel free to contact us at firstname.lastname@example.org.