A Guide to the EMIR Trade Reporting Obligations – Part 3 (the final countdown)
I really can’t believe we are just a fortnight away from EMIR Reporting go-live date. It feels like time has flown since my last post on the 18th December on this very topic.
I really can’t believe we are just a fortnight away from EMIR Reporting go-live date. It feels like time has flown since my last post on the 18th December on this very topic (You may find EMIR Trade Reporting Part 2 here and Part 1 here). I don't think I have ever been that stressed in my career, it seems like my "To Do" list is endless but time is just not enough to take everything in. Having a chat with a lot of colleagues from other Banks, the feeling is the same: We are doing our best to deliver a Report on day 1 yet we are pretty confident that the first period will actually be a "prolonged" UAT period for all of us.
Being at the point where you have picked your partners, would it be your TR and your 3rd Party provider, or even agreeing to a delegation of Reporting with your counterparty, you now have to dive deep into detail and prepare your "Who does what and by when" dashboard in order to be able to monitor effectively the project's status. Let's all agree that this is not a "one man show" task. EMIR Reporting is like a mobile, all parts have to be in sync in order for the vehicle to start moving. So what are the areas that should be working in parallel?
Each entity has a different structure but definitely your IT team now have the hot potato in their hands. If your IT team is familiar with the derivatives' business, then less effort is required, otherwise, the Operations/Business teams should cooperate closely with the IT as time is running like hell and there shouldn't be any gaps left.
Although you may have done preparatory work on the mapping of your data into the ESMA fields and format, when you actually get the technical documents of your TR in hand, you may discover that you need additional information (As TRs request extra fields in addition to the ESMA ones) or what you have already mapped into the ESMA fields is not correct thus you may find yourself in a situation where what you have asked your IT to implement, may not be valid. There is no recipe here!
Ask as many questions as you can from your TR and take a good look at the examples provided by them and last but not least call your colleagues from other entities and share ideas. It's not a shame, we are all in the same battle, against the same 'enemy' (time). Incomplete information and a clock ticking fast! If you are asking me, the most difficult part, especially at this point in time, is that TRs are still changing their specifications. If you manage to make your IT people understand this abnormal situation, please let me know how you did it! I would definitely need some help on this.
Sending the report over is also a challenge itself. You may have successfully completed the details in the ESMA fields but you still need to get the Report across. Is it csv? Is it XML? What is the best option for you?
Depending on your entity's size and policy, you may be either working with external law offices (acting as consultants) or your own legal team may have undertaken the "EMIR Agreements" project, because, as all of us have realized by now, this is exactly what it is, a huge project. When working with internal resources you may come up against delayed responses, but you have to make them understand that delay is not an option. It's not only the Agreements with your TR or 3rd Party provider that they have to review and comment but also provide any KYC documents that your TR may request and of course they should review or prepare (if you offer such service) any Delegated Reporting Services Agreements.
With regards to Agreements, what has proven very useful to me is a kind of matrix, where depending on the type of the counterparty (FC/NFC), their residence (EU/NON EU), their relationship with my entity (affiliates/non affiliates) and the type of the existing Agreement between us (ISDA, etc) I have put the expected Agreement in the respective box.
How will you ensure that end to end reconciliation is done? How will your firm prove the data delivered equals the data received? Will you do it yourself or will you count on a 3rd Party provider?
Are your records updated with respect to the ESMA fields on counterparty data? Do all of your counterparties know that they need to have their LEIs before Reporting Date? Especially when it comes to corporates, contacting them can prove really resource consuming as despite the work of regulators and industry bodies, smaller companies may still not know what’s required and you may end up explaining the very basics.
Have you agreed on the backloading population & UTIs process with your counterparties? As backloading involves trades that were outstanding at EMIR's effective date of August 16th, 2012, big derivatives users can have tens of thousands of UTIs to assign, and need to do it quickly. Are you ready to generate UTI's or at least interim UTI's for your smaller counterparties?
So many things to do, so little time and the way I see it February 12th is not the end of our ordeal, it's just the beginning of a new one. I can't even imagine what will happen after day one when inconsistencies of approach between TRs, Banks and CCPs will come up and data ending to different TRs will need to be reconciled. I wish us all a safe landing!
Have a look at my EMIR Checklist attached below – and let me know your stories – how is trade reporting going for you?