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

04 October 2013 | Maria Leontiou

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 Risk.net 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.


Comments

Can you share (just to have a sense) what's your over all estimated time frame to implement this reporting piece?although I share your feeling, but you guys are already the luckiest among the luckiest, just imagine those nations outside EU alias Third Country in ESMA vocabulary, apart from complying national rules also need to take care about EU and US requirements.

Hi Maria, thanks for posting and also for mentioning me :)As to the topic of implementation time - this depends on a number of factors that can contribute significantly to the time and effort needed to get this sorted. Factors can be:- self-reporting vs. using a third-party softwareThis, mind you, just makes one part of the equation go away in terms of effort on your organization. This is the reporting end to the trade repository (and potentially the reformatting of your data into the required TR data format). You still have to identify the products that need reporting, the systems the required data for these products is held in, the gaps that need to be closed and finally have a data gathering, consolidation and transfer mechanism in place to provide the data to the 3rd-party provider or to the TR itself.Why use a 3rd-party provider then, you ask? Well, actually three good reasons:(a) You do not need to accomodate changes from the TR.(b) The provider will be able to help you with insight and knowledge you need.(c) Typically, you use the provider also for other reporting purposes.- number of systems involved- variety and number of products involved- trade repository you want to connect to (think contracts, specific data requirements and more)- capability of you organisation to manage such a complex data projectThere is still more - but just looking at these things you get an inkling of the complexity. As for a timeframe. 8-12 weeks is only possible if you have a fairly simplistic product and system setup, have most of the data available and have a legal department that is not swamped with other regulatory matters (and believe me, all of them are currently) and able to quickly get contracts with the chosen TR and a potential 3rd-party provider in place.My experience shows that you can expect at the very least 3 months but to put in a sensible, well thought-through solution takes quite a bit longer.Best, Tom

Michael thank you for your comment. I guess this tool will be useful for those that wish to avoid building something from scratch.......

Reblogged this on Edgar's Real Edge and commented: Subject of interest and importance.

Hi Maria,Excellent comment as always -- I always enjoy your contributions to Bill's site. Genpact Headstrong Capital Markets has an EMIR reporting solution -- Trade Status Reporting and Monitoring (TSRM). TSRM was first built for the US market to comply with DFA reporting, which, as you say, is less complex than EMIR. Happy to put someone from the company in touch with you if you wish. Have a great weekend in beautiful Greece!Mike

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. http://theotcspace.com/2013/10/04/emir-self-reporting-for-non-financials...

Maria Leontious post here about self reporting by NFCs. There is also a comment from

Maria Leontious post here about self reporting by NFCs. There is also a comment from

Very interesting thoughts Maria. As one who spends the majority of their time in the energy industry, EMIR for NFCs has been an education for energy traders. Energy trading companies are not used to "big compliance", such as it is in banking, and in many cases have under estimated the effort required to comply.As Will mentions, energy companies not only have to deal with EMIR, but also REMIT, which has a trading reporting stream of its own, and will come into force next year. As such there are therefore several requirements which may or may not be handled at once.In terms of preparedness, there is a great deal of variation, with some of the larger companies being quite ready. However most are only in the process of implementing solutions now, with a few not having started.The majority of large and medium sized energy companies will self report, and I would expect a significant number of smaller players to do so as well. They will need a lot of help over the next few weeks if they are to have any chance of meeting the deadlines.the goings on of energy trading regulation can be found on my blog too: www.energytradingregulation.com

Tom thank you for adding timeframes. If you are asking me, Trade Reporting is the most complex EMIR requirement so far. Add the disclosure constraints applicable to different jurisdictions and there, it's right in front of you, the personification of complexity...

Really interesting article and thanks for posting.I must disclose up front that I am slightly biased as I work for Impendium Systems who specifically deal with regulatory reporting solutions, traditionally in the financial services world but with EMIR (and other regulations) encroaching on non-financial firms, we're starting to do much more in that area too.The burden of regulations is such that 4 years ago we created a regulatory platform (Elements: http://impendiumsystems.com/platform/) onto which we have incorporated the regulations themselves (for example, MiFID, EMIR and soon REMIT) thus baking into the system some of the complications of the data fields, validation, rules etc. It also means more than one regulation can be supported on one platform. Some of the NFC(+)'s that we speak to are looking at dealing with EMIR and REMIT in a single programme whereas others are looking to delegate their reporting to another party (perhaps the exchange or sell-side). It appears this decision is largely based on volume, timing or existing infrastructure. I can't speak for other vendors but in terms of implementation, we would look to deploy an EMIR solution in 8-12 weeks. We also see huge variance in the preparation that firms have done in terms of regulatory preparation which would of course affect deployment of any programmes.Needless to say, you're not on your own! There are many financial and non-financial's struggling with EMIR preparedness. For NFC's throw in REMIT too and the compliance teams look to be well employed for the foreseeable future!Will