After the scramble to meet the 12th February ‘go-live’ for European Markets Infrastructure Regulation (EMIR) trade reporting, you may feel that your work on this is now done. However, I think that the fat lady needs to step away from the microphone for a while as it’s clear that there is still quite a way to go before we have a fully functional, market-wide process for trade reporting which produces meaningful data for the regulators. I expect that the majority of firms can now send a report of some description by the T+1 deadline, but how many of these are complete and matching with the counterparty submission? Given the issues that are still outstanding regarding the exchange and consumption of unique trade identifiers (UTIs) and on specific field contents and the scope of reporting, it is hard to imagine that the vast majority of reports are able to be paired and matched, certainly by T+1 or T+2. The quality of data currently available to the regulators must surely then be questionable.
Over the next few months, firms may be concentrating on hitting the next reporting deadlines for further backloading of historic trade data; the 12th February +90 days, and then +180 days for other types of trade. Alongside these projects, they should also be looking to regularise their base reporting solution as market practice and further European Securities and Markets Authority (ESMA) guidance evolves. Additionally, they will need to examine the root cause of any reporting breaks to ensure that any operational issues giving rise to incorrect reports are dealt with promptly.
Thus far the regulators have taken a pragmatic stance in terms of firms’ ability to be fully compliant, but at some point this will change. If you are not already fully compliant, you will be expected to show a detailed plan for achieving full compliance with the reporting requirement by a specified drop dead date. Interestingly, the Financial Conduct Authority (FCA) has just announced such a date for the risk mitigation aspects of EMIR, stating that ‘the FCA expects that such plans will be completed and implemented by 30 April 2014 and that firms will be able to demonstrate compliance after that date.’ It may well be that your firm still has work to do on implementing these business conduct changes as well as refining your trade reporting solution. If so, there is perhaps an opportunity to align the reporting solution with the timely confirmations requirement?
In conclusion, the fat lady probably has time for another pizza before grabbing the microphone again. Everyone involved should keep their eyes fixed on the stage, as this show is far from over.
This blog appeared on Finextra. Click here to see the entry on the Finextra website