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EMIR Futures Reporting- no delay shock

In a surprise move, the EC announced yesterday that it will not take ESMA’s advice, counselling a one year delay to the start of futures reporting under EMIR. Full reporting for exchange-traded derivatives will begin in January 2014 as per the original timetable.

Risk quotes EC EMIR tsar Patrick Pearson,”The decision has been taken that the deferral ESMA suggested will not take place.” An unnamed delegate at the same conference described the decision as “bonkers”, opining that industry compliance with the January 2014 date is impossible.

ESMA asked the EC on 6th August for a one year delay to January 2015, on the (implied) grounds  that it’s own rules were unworkable in practice.  They oblige a reporting counterparty to a listed derivatives trade to report to a trade repository within one working day of execution. However, “reporting counterparty” is insufficiently well-defined and may potentially include: clients, market-makers, brokers and clearers. Pearson held out that the possibility that ESMA may devolve the reporting obligation to a single, defined counterparty, describing it as “the preferred option”.

 The EC decision to keep to the January 2014 start date effectively holds ESMA’s feet to the fire, forcing it to shine a light through the regulatory fog- a welcome change from the normal knee-jerk postponement.  However, even if ESMA were to radically clarify and simplify its rules, full compliance by the (new) original date will be a difficult challenge for whomever the obligation finally lands upon.

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