Just when you thought it was safe to go back into the water, ESMA has hit us with a third EMIR Q&A in as many months. The impact on trade reporting can be summarised as follows:
Funds and counterparties (General Question 1)
The text now states that the fund manager must (rather than can) report on behalf of the funds and that the ID of the fund manager shall be provided as the report submitting entity. Please take care with this statement – we do not think it should be taken at face value. Whilst the amended EMIR Article 9 makes the fund management companies ‘responsible and legally liable’ for the reporting, we do not believe this is intended to prohibit delegated reporting by the broker (or another third party) on behalf of the fund manager (where the third party would be the ‘submitting entity’). It is another example where ESMA needs to be more precise in its use of language and advice to the industry.
Reporting of outstanding positions following entry into force of EMIR (backloading)
TR Question 4 has been completely deleted reflecting the removal of the backloading obligation following Refit.
Intragroup transactions (TR Question 13)
Again, synchronising with Refit, the text clarifies that intragroup trades are not reportable if certain conditions are met. These conditions are outlined in TR Question 51.
Blocks and allocations (TR Question 39)
Similar to General Question 1, we have further imprecise text from ESMA. ESMA states that the fund manager must report to the trade repository on behalf of the individual fund where the fund is identified as the counterparty to the trade. While the fund manager is responsible and legally liable for making the report, it can still delegate the reporting obligation. This ‘change’ applies from 18 June 2020.
Notional amount field for credit index derivatives
Where there is a change in index factor due to credit events, counterparties should not modify the notional (field 2.20); they should only change the index faction (field 2.89).
Not a huge amount of change in the latest Q&A, but it does demonstrate some of the pitfalls in interpreting the ESMA text and the importance of keeping in touch with the regulatory changes. If you’d like some help interpreting the changes or would like transparency of the quality of your EMIR trade reporting, please contact us to find out more about how our quality assurance and controls can get your reporting accurate.