With its Communication of 13 July 2018, the Commission de Surveillance du Secteur Financier ("CSSF") as supervisory authority for the European Market Infrastructure Regulation ("EMIR") stressed its attention on an accurate reporting of derivative transactions. This communication follows the individualized dunning letters to non-financial counterparties ("NFC") for EMIR reporting in spring 2017 and the EMIR questionnaire to Banks of winter 2017.
The latest updates to EMIR's reporting framework entered into force on 1 November 2017. They introduced inter alia new requirements for market data. Out of KPMG's experience, some participants faced difficulties with the availability of standardized identifications: Legal Entity Identifiers (LEI) of each counterparty, the Unique Trade Identifier (UTI) of each transaction and the International Securities Identification Number (ISIN) of the underlying. In addition, many participants failed to harmonize data transmitted under MiFIR with the requirements under EMIR.
One and a half years later, the CSSF aims at ensuring these obstacles were mastered in the meantime. The following issues will be deemed as an indicator for the contrary – unstable processes with regards to EMIR reporting duties:
- Unpaired or matched standardized identifications for reports of one transaction which were sent separately by two counterparties ("Double Sided Reconciliation").
- Inaccurate market information, such as publicly available identifiers of instruments, benchmarks or stakeholders.
- Report rejections sent by the TRs, especially in conjunction with the new validation rules, and a possible delay in reporting due to hot fixing of issues.
Given this publication, Fund Managers should ensure their EMIR reporting meets the expectations of the Luxembourgish authority: Though reporting requirement may be delegated, the Fund Manager remains responsible for compliance with the regulation.
The full text of the Communiqué is available at the following link.
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