Clearers Mull Common European Trade Reporting

Daniel Corrigan, chief executive of CME’s European trade repository, said clearing houses have been discussing a common process for reporting transactions for their members as the launch of EMIR trade reporting approaches next month.

On 29 November last year the European Securities and Markets Authority approved CME European Trade Repository and rival ICE Trade Vault Europe as trade repositories under the European Market Infrastructure Regulation taking the total number of authorised repositories to six.

Under the new regulations end users can delegate their reporting to a third party such as a bank or exchange, while still retaining responsibility for the timeliness and accuracy of these reports.

Corrigan told Markets Media: “Delegated reporting has come to the fore. The clearing houses have been discussing a common process for reporting transactions for their members and we can add the end client details if the client wishes. This takes away any chance of error and makes common sense.”

Five derivative asset classes are covered by EMIR – credit, interest rate, equity, foreign exchange and commodities – which also requires both counterparties to report over-the-counter and exchange-traded deals from next month.

“I am really confident that on February 12 the trade repositories will be able to take trades, hold trades and report positions,” added Corrigan.

CME is reporting all five asset classes, including foreign exchange as it offers foreign exchange futures. In contrast ICE has chosen not to report foreign exchange.

“Foreign exchange is the asset class that will require most effort and work and there are still likely to be issues when reporting goes live in February,” Corrigan added. “The over-the-counter bilaterally settled market remains opaque with a lack of electronic platforms and standard messaging formats so these transactions, which number in the tens of thousands a day, are the more likely ones to be rejected by repositories.”

Corrigan said CME had the advantage of a pedigree in providing detailed regulatory reporting for clearing and has learned lessons from reporting swaps in the US for more than a year.

“The European repository has a similar architecture to the US SDR but we have added more functionality to reconcile trades and aggregate data for regulators,” he added. “US reporting is in real time while in Europe it is T+1 so we have more time to correct any errors.”

Jeff Davis, partner in the markets and trading practice at consultancy Baringa Partners, told Markets Media that clients are choosing trade repositories based on how proven they are in an asset class, the ease of interfacing and how easy it is to transform their internal data into the required reporting format of the repository.

Corrigan said: “We have more than 30 staff in client development in Europe and trade reporting has taken over their lives. They have previously marketed CME Group’s  futures offering and clearing but trade reporting has given them the opportunity to talk to institutions they previously would not have dreamed of contacting.”

Davis said: “Some repositories offer complementary services, such as clearing, or regulatory reporting in other jurisdictions. In some cases, trade repositories already have access to some of the data required for reporting through these complimentary services, reducing delivery effort.”

Davis added there are still likely to be adjustments and corrections to the reporting process after going live in February

“Clients will also have to update their EMIR reporting capabilities for August for collateral, and also may need to extend reporting for other regulations such as REMIT and derivatives reporting for other G20 countries and Switzerland,” he said. “Therefore, clients should see regulatory reporting as an ongoing journey which requires incremental investment rather than rather than a single step.”

REMIT (Regulation on Wholesale Energy Market Integrity and Transparency) requires market participants to report wholesale energy market contracts within the European Union to a new body called Agency for the Cooperation of Energy Regulators in order to reduce markets manipulation and is likely to be implemented either late this year or next year.