Abide Financial is an approved reporting mechanism (ARM) that delivers regulatory data on behalf of buy-side clients. To extend its service to fund managers obliged to report their derivatives activities under the European Market Infrastructure Regulation (EMIR), Abide has formed an alliance with REGIS-TR. Fund managers submit their data in an agreed format to Abide, which enriches and transforms it into the correct format for submission to REGISTR.Once submitted copies of the reports are distributed to managers to reassure them that they have met their obligations. Abide also manipulates the data to deliver management information to its clients. The COOConnect Guide to Derivative Reporting in Europe spoke to Chris Bates, a director of Abide Financial.

COO: Why did you choose to offer EMIR reporting services, and how exactly will Abide be helping derivatives counterparties achieve compliance with the trade reporting mandate?

Bates: We looked at applying for trade repository status but came to the conclusion that our time and effort would be better spent originating an alliance with one of the other repositories. We looked at the models of each and arrived at a business alliance with REGIS-TR, which is a great fit for us. We are one of the few players in the market that is a MiFID ARM, and we have utilised our experience of ingesting, validating and preparing transaction reports to adapt our services to the EMIR requirements. Our data management know-how simplifies the management of the reporting flow for our clients and helps them focus on generating profit, not simply meeting regulations or serving regulators. We do this by positioning Abide as a break-point between the regulators and the reporting firms, who can receive less support than is optimum to manage the changing regulatory landscape. We have established a platform ourselves, but that is not the service in itself. The platform is part of our service model, driven by Abide client support teams, to help our clients satisfy the regulations in an easier fashion.

COO: How is data exchanged between the client, Abide and the repository?

Bates: The process of data extraction that we conduct makes life easier for the client. With Abide, they do not have to submit data in a standardised format to us. We take data in any format, and then prepare it to fulfil the reporting obligation of the client, easing the strain on their technology and development resources. What this also means is that, as the European Securities and Markets Authority (ESMA) shifts its requirements subtly over time, the client will not have to adapt its extraction and reporting compilation processes in response. They can just continue to send the raw data to Abide and we will do the rest. We have taken this approach from our MiFID reporting service, where it has been a very successful model .

COO:Are you willing to customise services for clients?

Bates: We also build bespoke decision support tools and enhanced validations on behalf of our clients. This helps them in assessing changes in the reporting flow, while increasing accuracy. We also offer advice as part of our service, saving money on gaining external advice on the rule changes. With clients that have reporting obligations under EMIR and MiFID, we can run dual reporting for them from a single set of data. This helps reduce the cost and complexity of reporting.

COO: Do you offer connectivity to trade repositories other than REGIS-TR?

Bates: We have connectivity to the Depository Trust & Clearing Corporation (DTCC) Global Trade Repository (GTR) for Dodd-Frank reporting, should our clients need it. We also work with a few firms that want to use us for validation and data management but submit their data to DTCC directly, so we do that as well. We have the capabilities to connect with all of the other repositories, but our business alliance with REGISTR means that we will always suggest REGIS-TR to our clients as the default option. Client choice is important to Abide.Ultimately, the client has the freedom to choose their repository and the elements of the service we provide.

COO: What type of client has approached you about delegated reporting?

Bates: Because we offer a full service model, dealing with all asset classes, we target every type of firm caught by the regulation. In general, we focus on clients with larger data flows, because our pricing model is optimised for institutions of that kind. We have large buy-side clients, some of which operate as high frequency traders (HFTs). We have also concentrated on the retail foreign exchange (FX) derivatives market, because we felt that it was under-serviced and yet had high that market. We have a number of brokers on board as well.

COO: So do you welcome smaller clients as well?

Bates: We can, and do, provide services to those with lower volumes. The discussion in most of these cases moves to return on investment analysis. For clients that choose to work with Abide, but do not have high volumes, it is possible to demonstrate significant benefits in terms of savings on I regulatory fines.

COO:What have your average daily volumes turned out to be?

Bates: We were expecting over 400 million reports per year, and have seen no reason to change that forecast. Our systems were all stress-tested to deal with sudden spikes in volume, so we have ample spare capacity to cope with a large increase in business.

COO: What were the biggest challenges that Abide faced ahead of the trade reporting deadline of 12 February 2014? Bates: No set of data was the same. Another issue was the challenge of delivering data enrichment on time. Our focus was on getting reporting started with our clients in spite of the lack of clarification from the regulator. The generation and dissemination of Unique Trade Identifiers (UTIs), Unique Product Identifiers (UPIs) and Legal Entity Identifiers (LEIs) was unresolved as the deadline passed. We are still working on the service as these areas become clearer. But our principal aim ahead of 12 February 2014 was to get our clients’ reporting flow started, with a view to continual improvement of the process thereafter.

COO:Has the number of approaches by prospective clients increased or decreased since 12 February 2014?

Bates: If anything, the number of enquiries increased as the deadline approached and that has continued beyond the deadline. We expect this trend to continue, as there is a large percentage of the market that is now waking up to the scale of the challenge. I also believe that there will be a lot of market participants that have gone direct to a trade repository which will - once they see regular clarifications in the regulation emanating from ESMA - realise the ongoing burden of dealing with reporting directly is unsustainable. They will be actively looking for a solution such as the one Abide offers. It could become very expensive trying to keep up with the developing landscape.

COO: How long do you think it will take for EMIR trade reporting to settle into a workable routine?

Bates: We are expecting 18 months of flux. If you look at reporting under MiFID, it took a long time for the market to get to grips with the regulation. It only really happened once the first regulatory fines were handed out. I would not at all be surprised to see a similar scenario emerge under EMIR.