Post-Trade an OTC Mandate Under Emir

Terry Flanagan

Post-trade processing for OTC derivatives transactions is a cornerstone of European Markets Infrastructure Regulation (Emir).

Article 11 of Emir (in force since March this year), is concerned with risk mitigation for non-centrally cleared OTC derivatives, and requires “the timely confirmation, where available, by electronic means, of the terms of the relevant OTC derivative contract.”

In light of Emir, there is a clear need to ensure all client trades are confirmed with an electronic audit trail. “Under the terms of Emir, investment banks need to automate the processing of confirmations not just with their market side counterparty brokers, but also with their investment manager and corporate buy side clients,” said Paul Taylor, director of global matching at Swift.

Swift’s Affirmations application supports compliance with Emir by making multi-asset class electronic confirmation matching accessible to firms of all sizes.

Delivered via Swift’s Accord matching application, it gives users such as investment managers and corporates a single screen view of the details of all their trades with all their counterparties, and enables them to accept or reject them with a simple mouse click.

Currently, many foreign exchange (FX), money market (MM), derivative and commodities transactions are confirmed by email or fax, or not confirmed at all. The operational and settlement risks introduced by this manual process are unacceptable in today’s environment, and the regulators want to see them eliminated.

Separately, Depository Trust & Clearing Corporation (DTCC) and TriOptima have launched a data connectivity service between the DTCC Data Repository (U.S.) LLC (DDR) and TriOptima’s triResolve portfolio reconciliation service.
The service enables the reconciliation of OTC derivatives trades reported to DTCC’s U.S. trade repository, and is a significant step aimed at improving portfolio risk management for dealers and end users.

It will help ensure compliance with the CFTC mandated reconciliation deadline of August 23. DTCC and TriOptima anticipate that their collaboration can also be extended to market participants in Europe where portfolio reconciliation and trade reporting rules will come into effect imminently.

The Emir portfolio reconciliation rules will come into effect on September 15, 2013 and Emir mandatory trade reporting will begin on January 1, 2014.

“Our cooperation with TriOptima enables DTCC to offer its participants the ability to meet their portfolio reconciliation requirement leveraging the same submission used to meet their trade reporting obligation,” said Marisol Collazo, U.S. CEO for DTCC Data Repository. “We are committed to working with complementary third party service providers like TriOptima so our mutual clients to help them effectively meet their regulatory mandates globally.”

DTCC is currently the only trade repository with a live connection to triResolve. DTCC’s global trade repository services are also the only provider that supports trade reporting in all 5 OTC derivatives asset classes with all major dealers and 600 other market participants from around the world registered to use its services.

“We are delighted now to have live repository data directly feeding our reconciliation service.” said Raf Pritchard, CEO of triResolve. “This both contributes to data accuracy and creates opportunities for efficient workflow for industry participants, including performing regulatory reconciliations. We believe that this kind of cooperation and interconnectivity is the way forward for post trade services.”

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