Richard Wilkinson, director, post trade solutions at
The EMIR regulatory requirement in Europe,
which requires the reporting of trades and positions to a trade
repository (TR) has created an enormous cost and resource
burden for derivatives market participants throughout the value
The dual-sided nature of exchange traded
derivatives means setting up a reporting structure is complex
enough. Then, if an end user has multiple clearing
relationships and each clearing firm reports to a different TR,
the complexity grows exponentially with basic processes such as
aggregation and reconciliation taking on nightmare proportions.
And that is before the mandatory reporting of positions and
collateral comes in later this year.
Having concentrated in the short term on
fixes to transport the required data to the right venues we
believe many firms and their suppliers are about to face an
even more problematic and unforeseen issue: data mismatches
arising from T+1 changes to F&O trades are creating a huge
backlog of unpaired trade and duplicate and erroneous UTIs are
preventing true inter-TR reconciliations from being made.
The only way to rectify these is to
reconcile the trade reports emanating from the data in the TRs
with the trade owner's own books and records. We believe there
is an urgent need for a data matching engine solution in the
complex multi-TR world to ease concerns about compliance and
potential subsequent fines, because short-term spreadsheet
based solutions will not stand up to regulatory scrutiny once
the current forbearance on enforcement ends.
It is clear that the delegation of trade
reporting will not resolve the issue. End users’
compliance officers will be wary of having a third party
produce reports and valuations and ultimately the
responsibility of an error lies with the owner of the trade, so
outsourcing the trade reporting does not abdicate this
They know it won’t be long
before regulators start handing out fines. There is a clear
reason for them to collect this data and if something goes awry
and they don’t spot it in time they will have to
answer to both their political masters and the industry.
At the same time operations teams are
already under extreme pressure. If the trade reporting issues
are not resolved quickly, bearing in mind that they will still
be getting clients on boarded for OTC clearing and dealing with
a raft of other issues, they are likely to reach breaking point
especially with potential fines hanging over them.