ESMA publishes 14th update to its EMIR Implementation Q&As

The European Securities and Markets Authority (ESMA) has today issued the 14th update of its Q&As document on the implementation of the European Markets Infrastructure Regulation (EMIR). The Q&As provide answers and guidance related to questions received regarding the implementation of EMIR.

This update includes guidance on a procedure to be followed by counterparties and TRs in order to update counterparty’s identifier in case where a counterparty obtains LEI or its LEI changes due to a merger or acquisition.

Below is the new text added in the 14th update of the Q&A:

The entity with the new LEI (i.e. merged or acquiring entity or entity which updates its identification to LEI – further “new entity”) or the entity to which it delegated the reporting shall notify the TR(s) to which it reported its derivative trades about the change and request update of the identifier in the outstanding trades as per letter (a) below. If the change of the identifier results from a merger or acquisition, the merged or acquiring entity is also expected to duly update the LEI record of the acquired/merged entity no later than the next LEI renewal date according to the terms of the endorsed pre-LOU/accredited LOU who issued the old LEI.

The TR shall identify all the outstanding trades, where the entity is identified with the old identifier in any of the following fields: counterparty ID, ID of the other counterparty, broker ID, reporting entity ID, clearing member ID, Beneficiary Id, Underlying and CCP ID, and replace the old identifier with the new LEI.

This is done through the following controlled process:

  1. The new entity or the entity to which it delegated the reporting, submits written documentation to the TR(s) to which it reported its derivative trades and requests the change of the identifier due to a corporate event or due to the LEI code being assigned to the entity. In the documentation, the following information should be clearly presented (i) the LEI(s) of the entities participating in the merger and/or acquisition or the old identifier of the entity which updates its identification to LEI, (ii) the LEI of the new entity and (iii) the date on which the change takes place. In case of a merger or acquisition, the documentation should include evidence or proof that the corporate event has taken or will take place and be duly signed.
  2. The TR broadcasts this information to all the other TRs through a specific file, where the (i) old identifier(s), (ii) the new identifier and (iii) the date as of which the change should be done, are included. To the extent possible, the file should be broadcasted in advance so that the change is not done retrospectively, but as of the date specified in (iii).
  3. Each of the counterparties to the trades, where any of the merged entities is identified, is informed of the modification by the TR to which they report.
  4. TR(s) shall notify also the regulators who have access to the data relating to the trades that have been updated.
  5. The change is kept in the reporting log by each of the TRs.
  6. Subsequent reports with the old LEI should be rejected by the TRs

2015/1485 Q&A