Is the latest version of the EMIR Q&As a major change or a minor amendment? Well, the Q&As include just two revisions to TR questions but as they deal with validations, the changes can well be considered significant.
For most reporting entities the EMIR validations will only help provide more visibility over reporting quality. However, it may mean that data problems will prevent firms from reporting at all and so a review of the impact of the validations should be considered before these are applied by the Trade Repositories at the end of October 2015. Not only that, the NCAs are using rejection rates as a proxy for data quality and will be using these to decide which reporting firms to visit.
The other change that has been slipped into the Q&As via the validations is the approach around “lapsed” LEI codes. These are codes that have passed a 2 year period since issue but have not been renewed.
Under Q&A TR Answer 10(b), ESMA stated that duly maintained LEI codes must be used however, lapsed codes are to be accepted by TRs when used to identify a counterparty. This is clearly a choice that ESMA is making around the LEI. Such codes are maintained where the owner has reconfirmed the data associated with the LEI record at the LOU, a process that happens every 2 years from issue. As these details change very infrequently, there is little risk in using lapsed LEI codes to identify a counterparty to a trade. Even where the details are incorrect, it is highly probable that the LEI will identify the correct party given that such codes are never reused.