A Closer Look At The Recent EMIR Q and A

Tuesday, 17/06/2014 | 05:05 GMT by Mark Kelly
  • The biggest surprise in the May Q&A was that it contained absolutely no changes to the Trade Reporting section.
A Closer Look At The Recent EMIR Q and A
Photo: Bloomberg

The biggest surprise in the May Q&A was that it contained absolutely no changes to the Trade Reporting section. This despite the numerous questions still to be answered about the logistics of mark to market and collateral reporting, which begins on 12 August. It is to be hoped that we don’t receive an updated Q&A the day before this new reporting phase begins, as happened in February. Here is a selection of (somewhat technical) questions, which Abide have submitted for ESMA ’s consideration.

1. After undertaking a compression exercise using type Z cancels, assuming that the net quantity of buys and sells is zero, would that zero position be reportable? If so, what would be the approach to population of fields such as Buy/Sell direction, price, notional amount, and how would that position ever be closed out?

2. For netted trades with residual quantities reported as positions, what is the advice re notional amount and other numeric fields? Should Unit Price be reported as the last price traded, mark to market price or average mid-price across all trades

3. Do positions, once created, have to persist and be updated, or can they be cancelled and recreated on every compression cycle

4. Would ESMA countenance a new Action Type (eg Type Q) which indicates a New trade for immediate Cancellation and incorporation into a subsequent position report (where required)? The advantage of this is to reduce by around 50% the number of messages submitted by ETD and CFD firms who are following the Report/Cancel/Position protocol

5. If a position is the result of a single trade, may the compression route be followed or should the trade simply be updated with the mark to market value?

The biggest surprise in the May Q&A was that it contained absolutely no changes to the Trade Reporting section. This despite the numerous questions still to be answered about the logistics of mark to market and collateral reporting, which begins on 12 August. It is to be hoped that we don’t receive an updated Q&A the day before this new reporting phase begins, as happened in February. Here is a selection of (somewhat technical) questions, which Abide have submitted for ESMA ’s consideration.

1. After undertaking a compression exercise using type Z cancels, assuming that the net quantity of buys and sells is zero, would that zero position be reportable? If so, what would be the approach to population of fields such as Buy/Sell direction, price, notional amount, and how would that position ever be closed out?

2. For netted trades with residual quantities reported as positions, what is the advice re notional amount and other numeric fields? Should Unit Price be reported as the last price traded, mark to market price or average mid-price across all trades

3. Do positions, once created, have to persist and be updated, or can they be cancelled and recreated on every compression cycle

4. Would ESMA countenance a new Action Type (eg Type Q) which indicates a New trade for immediate Cancellation and incorporation into a subsequent position report (where required)? The advantage of this is to reduce by around 50% the number of messages submitted by ETD and CFD firms who are following the Report/Cancel/Position protocol

5. If a position is the result of a single trade, may the compression route be followed or should the trade simply be updated with the mark to market value?

About the Author: Mark Kelly
Mark Kelly
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Mark Kelly is a Director at Abide Financial Limited, who are a UK Approved Reporting Mechanism for MiFID and offer a hub service for EMIR trade reporting, routing client transaction reports to Trade Repositories. Abide has helped dozens of financial services firms to comply with the EMIR regulations, since mandatory trade reporting began in February 2014. Mark has been working in the financial services sector in London and New York since 1990, and has occupied senior Audit and Compliance positions in Salomon Brothers, Lehman Brothers and Barclays Capital. For the past six years he has worked as a compliance auditor and consultant, advising UK firms on how to implement technology solutions which comply with regulatory requirements. He specialises in addressing the particular needs of those caught by the MiFID reporting requirements and in helping firms to meet their EMIR obligations. Mark has a BA and PhD from the University of Mark Kelly is a Director at Abide Financial Limited, who are a UK Approved Reporting Mechanism for MiFID and offer a hub service for EMIR trade reporting, routing client transaction reports to Trade Repositories. Abide has helped dozens of financial services firms to comply with the EMIR regulations, since mandatory trade reporting began in February 2014. Mark has been working in the financial services sector in London and New York since 1990, and has occupied senior Audit and Compliance positions in Salomon Brothers, Lehman Brothers and Barclays Capital. For the past six years he has worked as a compliance auditor and consultant, advising UK firms on how to implement technology solutions which comply with regulatory requirements. He specialises in addressing the particular needs of those caught by the MiFID reporting requirements and in helping firms to meet their EMIR obligations. Mark has a BA and PhD from the University of Durham and during his career has gained professional qualifications in Internal Audit, Computer Audit and Financial Services Compliance.

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