Webinar: Trade Repository Reporting Phase II - collateral and valuation

By Leon Freytag von Loringhoven


Dominic Hobson: Moderator of the event, founder of COOConnect
Daniel Jude: Director of Client Development and Sales at CME Group
David Nowell: Compliance Officer at UnaVista
Andrew Green: Head of Relationship Management and Sales for Europe and APAC at DTCC


The European Market Infrastructure Regulation (EMIR) stipulates that from August 12, 2014, financial counterparties and non-financial counterparties above certain thresholds must report daily collateral posted against open positions on a daily basis. This applies to both cleared and non-cleared trades. Given the haphazard way EMIR trade reporting was implemented back in February 2014, this is unlikely to be a straightforward process.


  • Who reports? The threshold to report lies between €1 and 3 billion, depending on the product. Once above the threshold with one product, you have to report daily.
  • The EMIR reporting template lists about ten values to be reported: market to market value, collateralisation, collateral portfolio etc.
  • Most participants get the mark-to- market value of a contract from the central counterparty clearing house (CCP), but it is often also publicly available.
  • Bilateral trades always seem to face problems, as they are not standardised.
  • Collateral needs to be reported within a single currency for each portfolio. So you need to use an exchange rate, which does not seem a very good way.
  • Trade reporting started on 12 February under EMIR, and did not go at  all well, especially in pairing and matching trades reported to more than one trade repository (although the trade repository panellists argue a lot went right, too).
  • The accuracy of the data was at least as great a challenge as the sheer quantity of it.
  • The real problem was not so much the volume of transactions, as the volume of participants, which was inflated by the late inclusion of exchange-traded participants.
  • Clients should have expected exchange-traded participants.  Instead, many focused on OTC derivatives only, which entailed less work.
  • Many clients, which had assumed they would not need to report, acted at the last minute when they realised they would have to – leading to a “delegation waterfall.”
  • An additional challenge in Europe is that both sides have to report, whereas  in the United States only one sider has to report and the sell-side does it for you.
  • The pairing rates are still not good. And if there is a problem in pairing, matching also becomes a problem. And even if matching takes place, this does not necessarily mean it is correct.
  • One of the major reasons for the lack of pairing is that the two sides are not using the same Unique Transaction Identifier (UTI).
  • UTIs are still a massive problem. Establishing a UTI is difficult because there is no single methodology or assignment of responsibility to generate it. Sometimes even both sides produce an UTI.
  • Collateral portfolio codes, linked to all UTIs, are simplifying reporting and will play a major role in reporting in the next months.
  • It is easy to get a Legal Entity Identifier (LEI) but scale can be problematic.  A fund manager running 900 funds, for example, needs 900 LEIs.
  • Problems are not more common in certain types of organisation, although, some small users have had more problems, and corporates struggled with something so unfamiliar.
  • The degree of complexity is another major factor in determining whether an organisation has problems.
  • Trade repositories have been helpful in trying to educate clients. Many educated their clients, e.g. through webinars. Still, there are limits to the ability of trade repositories to effect change. They can advise, but not give “hard advice.”
  • Trade repositories communicate well with each other and meet on a monthly basis.
  • The regulator is not (yet) dependent on trade repositories to calculate data.
  • As long as data is accurate and timely, the European Securities and Markets Authority (ESMA) does not mind where information comes from. Also, ESMA does not expect clients or counterparties to run a full validation of models, as long as the market-to-market value of contracts is correct.
  • It will probably take years until the trade reporting chaos will be solved. This is not unusual. Reporting under the Markets in Financial Instruments Directive (MiFID) dates back to 2007, and is much simpler, but still occasions plenty of errors, and changes all the time. Within the next six months things should bed down, and repositories, managers and clearing brokers learn from experience.
  • In the reporting form, you cannot put a “zero” in for an uncleared forward or FX swap - only a “u” for uncollateralised, or a value.
  • There is still a demand and desire for the regulators to be more unified, and to have greater equivalence between the G20 markets. A consultation paper published in February 2014 by the Financial Stability Board (FSB) expressed concern about this, but a promised final report has yet to appear. In July this year CFTC commissioner Scott O’Malia called on regulators everywhere to work together to harmonise swap data reporting “through an outcomes-based approach premised on substituted compliance and mutual recognition.”