October 4, 2013

EMIR Self-Reporting for Non-Financials. Is this really an option?

The funny thing about this regulation is that we all strive to comply with it while its timelines and standards are still evolving. This really feels as if we're shooting at a moving target yet this is no excuse for delays should we wish to ensure compliance. The most sweeping EMIR innovation is the reporting requirement as all counterparties to all derivatives contracts (OTC and exchange-traded) need to comply and there are virtually no exceptions (at least so far), all exchange and OTC derivative trades, intragroup trades, trades with non-financial counterparties must  be reported alike.

These past few months, Trade Reporting has been top priority for my entity and first and foremost, we had to decide whether to self report or delegate. This was actually a pseudo dilemma in our case as from the very first start we had decided, to offer the reporting service to our Subsidiaries and Non Financial counterparties, thus there was no sense in delegating as we would build the necessary infrastructure anyway. Following this, we spent numerous man hours trying to decode EMIR reporting fields, identify any gaps, map them to existing systems and figure out what developments will be necessary to our infrastructure in order to be able to gather the necessary information into a report of the requested format. Moral? Trade reporting is a lot more complicated than one may think, whichever way you look at it. What I kept thinking at that time was that if this is a burdensome project for a Financial Institution, how feasible is it for a corporate company?

Non- Financial counterparties vary from large sized enterprises that do all kinds of trades to small corporate or other companies that use derivatives only for hedging purposes.  If self reporting is an option for large companies, how applicable is such an option to smaller ones? And although delegation is possible, which is the most obvious decision to be made by small corporate companies, they will still be responsible for compliance, so they need to take all appropriate actions in order to protect themselves against errors. As Tom Riesack was quoted saying in yesterday's article by on how reporting questions pile up for Corporates  “As soon as you get to the smaller- or medium-sized enterprises, you find they haven’t got the information or the ability to build up this kind of reporting ability in time”.

Honestly, when the regulators decided that Non- Financials should also report, what were they thinking? Let me know in the comments if you face similar problems and have ideas on how to solve this..

Maria L.

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