GC Friday Interview: ESMA’s Reemt Seibel on EMIR Reporting

The European Market Infrastructure Regulation (EMIR) deadline for reporting derivatives trades to trade repositories (TRs) came into effect this week. Reemt Seibel of the European Securities and Markets Authority (ESMA), the technical and supervisory authority for TRs talks to Global Custodian about the readiness of the industry to comply and what happens with those who have not.
By Janet Du Chenne(59204)
The European Market Infrastructure Regulation (EMIR) deadline for reporting derivatives trades to trade repositories (TRs) came into effect this week. Reemt Seibel of the European Securities and Markets Authority (ESMA), the technical and supervisory authority for TRs talks to Global Custodian about the readiness of the industry to comply and what happens with those who have not.

Not all market participants have met the reporting deadline. How much is there left to do before compliance full compliance is achieved?

RS: We were seeing more problems on the non-financial side because it is a whole new regulatory framework for them. Often they didn’t have any derivatives reporting in place before so there are a few more problems there. Also, out of the non-financials, probably some of the smaller and medium sized companies are struggling a bit more and we appreciate that there may be a certain percentage who may not be ready today and may take a couple more days or a week to get ready.

The obligation to report is there from today (Wednesday) but lets face reality and we will know a bit more in the days ahead. At ESMA we thrash out all of the technical details, what to report, the filing of data and the provider guidance but the actual oversight and policing falls to the national regulators like the Financial Conduct Authority (FCA) in the U.K. They should at least police the action (and take enforcement action if need be) and that will be done in an proportionate manner. So in the non-financial areas they will look at each case and that will be done in a proportional manner. It will be a mixture of helping those companies making sure they get up to speed the fastest way possible.

What happens if they don’t?

RS: That is part of the regulatory toolbox. There is the possibility of enforcement because if they’re not reporting they are not compliant with the reporting rules. But I think there will be a proportionate approach to saying we will look at your case it you have been preparing for a while and you have been struggling to get a Legal Entity Identifier (LEI) at the very last minute. I think the regulator should appreciate that and say that if there is an action plan, get ready and start reporting very soon. It lies within the realms of the national regulator but I think it will be in a proportionate manner. Across Europe we are looking across hundreds of thousands of counterparties. It is a big change and I think regulators appreciate that, they appreciate the big timeframe and it is a big change for the whole industry. There will always be some teething problems and I think that’s natural when something new comes into play.

How is the delay in fleshing out LEIs affecting institutions’ readiness for EMIR reporting?

RS: We see problems in the non-financial area as its something completely new, while it looks better in the financial area because they have been preparing for quite some time. In many cases they are seeing similar reporting under MiFID and they have bigger IT systems. On the other hand, if you are looking at an energy SME somewhere in Germany with a small IT department, for them it might be a problem. From our side we are supervising trade repositories so that they are ready to take on new clients and receive the data because we are supervising them while the national regulators look into the reporting. We understand it is a bit of a rush at the end and in many cases they need an LEI , but there is some lee way it and if they are struggling they would probably accept reports without an LEI. They would need to connect to a trade repository or there is always the option to delegate reporting as a whole. In the last few weeks, we have told institutions that if they are struggling to meet the deadline please consider outsourcing the whole thing.

Is outsourcing the way forward for those institutions that have missed the deadline?

RS: It should be strongly considered because you are not outsourcing the actual legal liability to report, which will always remain with the company. The company that does the reporting on your behalf needs to be monitored and that relationship needs to be managed and controlled but the actual reporting can be outsourced. I think many people are looking at outsourcing reporting to their banks or brokers. There are plenty of options out there. TRs are also offering that service so people should consider it.

How will reporting be monitored?

EMIR reporting by the six trade repositories will be monitored by 30 national regulators on the ground, who will gather the information at the European level at ESMA. Over the next days and weeks we might get an exact sense of the numbers. Today it is about making sure the reporting works and the data is well received and that regulators get access to the data. They can look at data on each type of derivative. We need to receive the data and build it up. That data then moves into the oversight and supervision and that’s going to be the next big step for us. I think today is making sure everything works as smoothly as possible.

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