ESMA Updates EMIR Q&A

On 20 December 2013, the European Securities and Markets Authority (ESMA) published an updated Q&A document (ESMA/2013/1959) and accompanying press release on EMIR implementation.

The Q&A were originally published on 20 March 2013 and most recently updated on 11 November 2013.  The main purpose of the most recent amendments is to provide clarity on how exchange-traded derivatives (ETD) are to be reported to trade repositories.  In summary, the following changes have been made since the version published on 22 October 2013:

• OTC Questions
  • Calculation of the clearing threshold
    • Confirming that NFCs are allowed to take into account the netting effect of offsetting contracts when determining whether they exceed the clearing threshold
• Risk Mitigation techniques for OTC derivative contracts not cleared by a CCP
  • Confirming that FCs and NFCs can delegate the risk-management procedures and arrangements associated with non-cleared OTC derivatives (required by Article 11(1) of EMIR) to an asset manager who is providing portfolio management service to the counterparty on an agency basis
• Portfolio Reconciliation
  • Confirming that, on each reconciliation date, counterparties should re-assess whether they are performing the portfolio reconciliation with the frequency required by EMIR
• Frontloading requirement for the clearing obligation
  • Clarifying circumstances in which the frontloading requirement will not be applicable
  • CCP Questions
    • Segregation and Portability
      • Clarifying the circumstances in which excess margin transferred to a clearing member by a client does not have to be posted to a CCP
• Transparency
  • Clarifying the nature of information that must be publicly disclosed by a CCP and the meaning of ‘public disclosure’
  • TR Questions
    • Reporting of outstanding positions following the entry into force of EMIR (Backloading), confirming that:
      • backloaded ETD contracts can be reported at position level
      • information on valuation and collateral need only be reported from the date upon which the reporting obligations came into effect, rather than from the commencement of the transaction, and
      • backloaded contracts which are still outstanding on the date of reporting will require a Trade ID
• Reporting to TRs: Table of fields
  • Clarifying that ‘Trade IDs’ are an EMIR concept whereas ‘Transaction Reference Numbers’ are a MiFID concept
• Collateral portfolio code
  • Confirming that it is for the reporting counterparty to determine what unique value to put in the ‘Collateral portfolio code’ field
• Position level reporting
  • Detailing the conditions that must be satisfied before position level reporting can be used as a supplement to trade level reporting
  • ETD Reporting Questions
    • Scope of reporting
    • Which parties have to report
      • Confirming that it is the counterparties to a trade where the risk lies once the contract has been concluded that must report under EMIR – this can include the relevant CCP, clearing members, the firm executing the trade on the exchange and the actual counterparties to the derivative
• How should give-ups be reported
  • Confirming that where a give up occurs from an investment firm to a clearing member within the T+1 reporting deadline and there has not been any change of the economic terms of the original trade the trade should be reported in its post give up state
• Do partial executions have to be reported separately
  • Confirming that this is indeed the case
• Trade ID and Transaction Reference Number
  • Confirming that unique identifiers should be assigned centrally, ideally by the trading venue, or failing this, by the relevant CCP
• How should time stamps be populated – confirming that:
  • Execution timestamps should correspond to the time of execution on the trading venue, and
  • Clearing timestamps should be reported as the time at which the CCP has legally taken on clearing of the trade
• Who should report the value of collateral
  • Confirming that the value of collateral should be reported as the total value of the collateral posted by the counterparty responsible for the report

 

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