Markets

13 July 2018

Press release 18/23

On 1 November 2017, the revised technical standards1 with regard to the reporting of derivative transactions under EMIR2 entered into force.

The CSSF, as supervisory authority for EMIR purposes for Financial and Non-Financial Counterparties, in accordance with Art. 1(2) and 2(1) of the Law of 15 March 2016 on OTC derivatives, central counterparties and trade repositories, wants to remind market participants of the importance of ensuring compliance with the revised technical standards and accompanying validation rules regarding EMIR reporting, as published by ESMA3. The CSSF is increasing its focus on the review of reported transactions to Trade Repositories (“TRs”).

The CSSF therefore wants to remind market participants, falling under the scope of EMIR, of the following:

(1) Trade rejections: The TRs are expected to apply the new validation rules and reject any non-compliant report. These rejections, when they occur, should be reviewed by the reporting counterparty, or its delegate, acting as report submitting entity, and, if relevant, be resubmitted as soon as possible in compliance with the validation rules. A rejection does not postpone any duties with regard to timely reporting of derivative transactions.

(2) Double-sided transaction reconciliations: If both counterparties are in the scope of EMIR, EMIR requires both counterparties to report the transaction. In this context, TRs are expected to reconcile both sides of the submitted reports. The reconciliation is performed in 2 steps: a. Pairing: The pairing at the level of the TR is processed on both the Legal Entity Identifiers (LEI) of each reporting counterparty and the Unique Trade Identifier (UTI). The CSSF, hence, wants to stress the importance of reporting a common UTI for each transaction by both counterparties. b. Matching: Once both sides are paired, the TRs match the various reporting fields. Transactions that are neither paired nor matched could be considered as an indicator for unstable processes with regard to EMIR reporting duties.

(3) Content of the reporting: It is of utmost importance that the various reporting fields, as defined by the revised technical standards, are correctly reported. In case an inconsistency or an error is identified the CSSF expects the counterparties to correct these errors4. In particular, inconsistent information in fields with regard to publicly available identifiers of instruments, benchmarks, stakeholders (e.g. CCP, market) is an indicator for insufficient and inadequate processes and potential non-compliance with regard to EMIR reporting duties.

1 Commission delegated regulation (EU) 2017/104 of 19 October 2016, amending Delegated Regulation (EU) No 148/2013 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards on the minimum details of the data to be reported to trade repositories; and Commission implementing regulation (EU) 2017/105 of 19 October 2016 amending Implementing Regulation (EU) No 1247/2012 laying down implementing technical standards with regard to the format and frequency of trade reports to trade repositories according to Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories.

2 Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012.

3 https://www.esma.europa.eu/press-news/esma-news/esma-updates-emir-validation-rules.

4 For open transactions (i.e. still outstanding), initially reported before the 1 November 2017, errors and inconsistencies in reporting fields required as per the Commission Delegated Regulation (EU) 148/2013 and Commission Implementing Regulation (EU) 1247/2012 need to be corrected.