Saturday, August 17, 2013

ESMA Proposes to Delay Reporting Date for Exchange-Traded Derivatives

The European Securities and Markets Authority (ESMA) has asked the European Commission to allow for a later start date for reporting of exchange-traded derivatives trades to trade repositories. In a letter to the Commission, ESMA Executive Director Verena Ross proposed rescheduling the reporting start date for exchange-traded derivatives from January 2014 to January 2015 so that ESMA can provide additional guidance on this complex subject. ESMA is acting under Article 9 of the European Market Infrastructure Regulation (EMIR) to develop draft implementing standards.

Currently, ESMA is working on ensuring the consistent application of EMIR and its regulatory standards and implementing standards. The implementation work has revealed to ESMA the complexity of the reporting of trades subject to the rules of a trading venue and executed in compliance with those rules, including the processing by the trading venue after execution and the clearing by a central counterparty within one working day of execution.

The current reporting start dates to trade repositories contained in the implementing standards do not distinguish the methods of trading OTC derivatives and exchange-traded derivatives. ESMA believes that such specification would be necessary as there is otherwise a material risk that reporting of exchange-traded derivatives would not be harmonized. Thus, there is a need for further guidance to be issued. Without further guidance, exchange-traded derivatives reporting would neither be consistent nor would it serve the purposes for which it was conceived.

In this respect, ESMA proposes to develop guidelines and provide sufficient time for stakeholders to implement them. ESMA believes the guidelines are needed for a variety of reasons, including to clearly identify the counterparties of exchange-traded derivatives and to achieve consistent application of reporting requirements under EMIR and the Markets in Financial Instruments Directive (MiFID), to the extent possible.

The main obligations under EMIR are central clearing for certain classes of OTC derivatives; application of risk mitigation techniques for non-centrally cleared OTC derivatives; reporting to trade repositories; application of organizational, conduct of business and prudential requirements for central counterparties; application of requirements for trade repositories, including the duty to make certain data available to the authorities.