- 3.1. Client identifiers
- 3.1.1. Hierarchy
- 3.1.2. Understanding Legal Entity Identifier (LEI) and Interim Entity Identifier (IEI) codes
- 3.1.3. Understanding Business Identifier Codes (BICs)
- 3.1.4. Reporting examples
- 188.8.131.52. Execution of a Trade Directly on a Derivative Exchange
- 184.108.40.206. Provision of a Back to Back Trade to a Client Mirroring the Above Execution
- 220.127.116.11. Execution of a Trade via a Broker
- 18.104.22.168. Block Trades and Back to Back Trades (Allocations) to Clients Mirroring a Block Trade
- 22.214.171.124. Compressions
- 126.96.36.199. Novations
- 3.2. Instrument identifiers
There are a number of identifiers used in EMIR reporting, these can be broken down into client and product (instrument) identifiers. For both there is a hierarchy of identifiers which follow a waterfall approach which requires the most senior identifier to be used where this is in existence. If not, you move down the ranks to the next most senior.
3.1. Client identifiers
3.1.2. Understanding Legal Entity Identifier (LEI) and Interim Entity Identifier (IEI) codes
The LEI is the International ISO standard 17442Legal Entity Identifier (LEI) | SWIFT which consists of a 20 character, alphanumeric code, used to uniquely identify legally distinct entities that engage in financial transactions. LEIs are issued by Local Operating Units (LOUs) of the Global LEI System.The Legal Entity Identifier Regulatory Oversight Committee – LEI ROC
3.1.3. Understanding Business Identifier Codes (BICs)
The BIC is the International ISO standard ISO 9362:2014 for routing business transactions and identifying business parties. Typically, they consist of 8 characters, but can have 3 more, totalling 11. These 3 optional characters supplement the standard BIC and are used to identify specific locations, departments, services or units of the same business party. The standard structure of a BIC is as follows:BIC (Business Identifier Code) | SWIFT
- Business party prefix – 4 alphanumerical characters
- Country code as defined in ISO 3166-1 – 2 alphabetical characters
- Business party suffix – 2 alphanumerical characters
- Branch identifier (OPTIONAL) – 3 alphanumerical characters
3.1.4. Reporting examples
188.8.131.52. Execution of a Trade Directly on a Derivative Exchange
When a trade is executed on an exchange, the details of the trade at the exchange are not sufficient for the exchange to report the trade. Both parties to the trade (firms) need to make their own reports to the TR.
184.108.40.206. Provision of a Back to Back Trade to a Client Mirroring the Above Execution
Under EMIR, all derivative transactions should be reported. The trade on the exchange is not between the institution and its client. Therefore, the back to back trade to a client, mirroring the exchange transaction should be reported by the client and the firm to a TR. In practice, the clients report to the TR would be reported by the firm by prior agreement under delegated reporting.
220.127.116.11. Execution of a Trade via a Broker
When executing ETD trades via a broker a number of different reporting scenarios can arise.
Scenario 1: Give up to a clearing broker before end of reporting deadline
In this scenario the firm must report a single trade facing the clearing broker. In this scenario the execution broker is identified in the Broker ID field.
Scenario 2: Give up to a clearing broker after the reporting deadline
This would be a rare scenario as we expect nearly all trades to be cleared before the end of the reporting deadline.
As there is a trade with an executing broker only by the end of the reporting deadline, the firm must first report a trade against the executing broker. As the trade is not given up by end of T+1 it should be reported as uncleared.
Once cleared a second report is required showing the trade against the clearing member/broker. The first trade would then have to be terminated to avoid over reporting the exposures.
18.104.22.168. Block Trades and Back to Back Trades (Allocations) to Clients Mirroring a Block Trade
ESMA Q&As TR Answer 39 states that:
There is a distinction necessary between (1) scenarios where the block trade was conducted by an investment firm and then allocated to clients and (2) those scenarios where the block trade was concluded by a fund manager without own reporting obligation and then allocated to individual funds.
- In the first case the block trade should first be reported by the investment firm. The investment firm should then report the allocations to the individual clients.
- In the second case, block trades that are subsequently allocated to individual funds on trade date are not required to be reported. In such cases, the counterparty to the derivative transaction is the individual fund, therefore the allocations should be reported (a) specifying the relevant individual fund (on behalf of which the fund manager has entered into the block trade) as counterparty to the said trade and (b) specifying the allocation of the relevant part of the trade to the relevant individual fund. Block trades could sometimes be executed by an intermediary rather than on the open market. This takes place in order to avoid the trade causing large fluctuations in the price of a security. Such trades are subject to rules on reporting and clearing by a CCP but as per Q&As OTC Question 1(d) are not classified as OTC transactions.
In a compression, multiple trades exist and have been cleared. The original trades are closed per Client request by executing a new trade in an offsetting position to the original trade, which would be reportable. In a full compression, no residual amount remains after netting, so no new trade arises (e.g, no new UTI generated). In a partial compression, a residual amount remains after netting, and a new trade for the remnant is created, which would be reportable. The compressed original trades are terminated.
The trade between the original Parties is agreed and already has a UTI. The stepping out party (party where the trade is being novated from) will terminate the original trade and will report the termination, as will the remaining party, because of two sided termination. A new trade between the remaining party and the stepping in party will be reported by both parties.
3.2. Instrument identifiers
3.2.2. Understanding Alternative Instrument Identifier (Aii) codes
The Aii code is comprised of six elements that together uniquely identify an instrument. The six elements are:Alternative Instrument Identifiers | FCA
- ISO 10383 Market Identifier Code (MIC) of the regulated market where the derivative is traded
- Exchange Product Code – the code assigned to the derivative contract by the regulated market where it is traded
- Derivative Type – identifying whether the derivative is an option or a future
- Put/Call Identifier – mandatory where the derivative is an option
- Expiry Date – exercise date/maturity date of the derivative
- Strike Price – mandatory where the derivative is an option
3.2.3. Understanding International Security Identification Numbers (ISINs)
ISINs are issued by an approved numbering agency. Each agency is only approved to allocate ISINs for instruments in its jurisdiction. ISINs are 11 characters long and are produced using the following structure:
- 2 alphabetical characters – normally a two character country code (e.g., GB for UK ISINs)
- 8 alphanumeric characters – values allocated by the numbering agency
- 1 numerical character – a check digit
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