6. Interest Rate Derivatives

Interest rate derivatives are reportable under EMIR. The legislation requires entities that enter into any form of derivative contract including credit and interest rate derivatives to be reported. Contracts defined as derivatives under EMIR include:

  • Forward Rate Agreements
  • Forwards
  • Futures
  • Options
  • Spreadbets
  • Swaps
  • Basis swaps
  • Fixed to-float interest rate swaps (IRS)
  • Overnight Index swaps
  • Swaptions

6.1. The Reporting of Interest Rate Derivatives under EMIR

The following fields are some of the fields that would be reported for Interest Rate Derivatives.

Effective date leg 1/2
The effective date is the date from which interest would start to accrue on the leg of a swap. The effective dates on an interest rate swap would be at spot – two days after the execution date, or the effective date could be at some future date for a forward swap. It is possible to enter a swap where the effective date is prior to the execution date.

6.1.1. Fixed and Floating Rate fields

Fixed rate of leg 1/2
Would be the interest rate on a fixed leg expressed as a percentage.

Fixed rate day count
The day count on which interest is accrued on. For example:

  1. Actual/365 means that interest is calculated on the actual difference between the number of days. The /365 indicates that it is assumed that a year has 365 days
  2. 30/360 would mean that interest is calculated on the difference between the number of days, but each whole calendar month in the calculation, is assumed to be 30 days. The /360 indicates that it is assumed that a year has 360 days

In fact there are several 30/360 day bases, which are different on the way the days in the first and last months are calculated and days in February are calculated.

Fixed leg payment frequency
This is the payment frequency of interest on the fixed leg, this would typically be quarterly, semi annually or annually.

Floating rate payment frequency
This is the payment frequency of interest on the floating leg, this would typically be quarterly, semi annually or annually.

Floating rate reset frequency
This is the frequency of how often the interest rate on the floating leg is reset, this would typically be quarterly, semi annually or annually. The floating rate reset frequency can be more often than the payment frequency.

Floating rate of leg 1/2
This is the actual interest rate accrual on either one or both of the legs on a swap.

Strike price (cap/floor rate)
For Caps and Floors this is the rate of the cap or the floor. For swaptions this field will be null and the Fixed rate of the swaption will be quoted in fixed rate of leg 1/2.

Clearing flag (mandatory clearing section)
Indicates whether the reported contract is subject to the clearing obligation under Regulation (EU) No 648/2012. This field can have values Y, N, or X (N/A).

A contract must be identified as to whether it is subject to mandatory clearing by the category (for mandatory clearing) of either counterparty. That means that for any contracts entered into that will have to be cleared in the future (contracts between category 1 or 2 counterparties entered into after the front loading period begins for that category of counterparty), the clearing obligation field must be flagged as “Y” in the clearing obligation field and “N” if not.

For contracts that are not subject to the clearing obligation and contracts in asset classes other than rates and credit the clearing obligation is not applicable so “X” should be reported.

6.1.2. Price fields

Price/rate
The price of the interest rate derivative, which will be the fixed rate of one of the legs.

Price notation
The price notation will explain how the price is quoted. For Credit derivatives, this would either be percent or basis points.

Price multiplier
The number of units of the interest rate derivative, contained in a trading lot. For interest rate swaps this would be one.

6.2. Examples of populating the relevant fields

Field Name Example Value
Effective date leg 1/2 2009-01-20
Fixed rate of leg 1/2 0.0446
Fixed rate day count ACT/365.FIXED
Fixed Leg Payment Frequency 1Y
Floating Rate Payment Frequency 6M
Floating Rate Reset Frequency 6M
Floating Rate of leg 1/2 EUR-EURIBOR-Reuters
Strike Price 0.00475
Clearing Flag X
Price/Rate 0.03705
Price Notation PERCENT
Price Multiplier 1