FIA Recommends Changes to Exchange Traded Derivatives Reporting Under European Regulation

London, U.K. – FIA today published a new position paper that highlights the concerns of market participants with the current reporting framework for exchange traded derivatives (ETDs). Further, and more importantly, FIA suggests alternative solutions which will assist regulators to monitor systemic risks in the ETD market, improve data quality and reduce existing inconsistencies with European Market Infrastructure Regulation (EMIR) reporting obligations.

“Trade reporting is extremely important and needed, and it is one of the more significant changes that came out of the G20 Pittsburgh accords for the monitoring of systemic risks,” said FIA President and CEO Walt Lukken. “Today we are making several recommendations to help regulators get the information to monitor risks in a way that is efficient for market participants.”

This paper has been prepared to assist ongoing discussions about the efficiency of regulatory reporting in the EU and the possible streamlining of reporting obligations in the derivatives markets. The paper briefly summarizes the material issues and potential solutions, with a view to generating further debate and discussion with, and within, the legislative and regulatory communities. FIA makes the following recommendations:

• Modifying the legislative text in order to grant EU regulators the authority to allow reporting firms to satisfy the EMIR reporting requirements by submitting ETD position reports and removing the obligation to report transaction-level details.
• Adopting a position-level reporting regime to more accurately reflect the nature of ETDs, which are standardized contracts that are “compressed” into a net position at the end of each day. A position-level reporting regime would also provide a more accurate representation of ETD lifecycle events and margin/collateral changes given that these take place at position level and cannot be reported at transaction level.
• Discontinuing EMIR transaction-level reports, which can occur without loss of regulatory oversight for systemic risk purposes because it is the end-of-day position that is the most relevant and not the individual transactions.
• Position-level pairing and matching should only be required if the transaction-level reporting, and thus reconciliation of transaction-level reports, is removed.
• Transactions and positions entered prior to January 2018 should not be subject to back-reporting requirements.

FIA encourages policymakers to acknowledge the recommendations set out within this paper and support the modifications of the EMIR Reporting regime for ETDs, which remains under review, as envisaged in the recently published text of EMIR Refit. FIA stands ready to assist policy makers and legislators as required.

 

FIA is the leading global trade organization for the futures, options and centrally cleared derivatives markets, with offices in Brussels, London, Singapore and Washington, D.C. FIA’s membership includes clearing firms, exchanges, clearinghouses, trading firms and commodities specialists from more than 48 countries as well as technology vendors, lawyers and other professionals serving the industry. FIA’s mission is to support open, transparent and competitive markets, protect and enhance the integrity of the financial system, and promote high standards of professional conduct. As the principal members of derivatives clearinghouses worldwide, FIA’s member firms play a critical role in the reduction of systemic risk in global financial markets.