The European Commission has a long-term aim of simplifying reporting by setting out standard requirements in one document, rather than in separate regulations.
Andrew Douglas, DTCC
Andrew Douglas, chief executive of DTCC Derivatives Repository Ltd and managing director of DTCC government relations for Europe and Asia spoke on the reporting regime at the City & Financial Global Conference on MiFID II, hosted by law firm Norton Rose Fulbright in London last week. He is a member of the European Post Trade Forum, an expert group set up by the European Commission.
“There are so many different reporting regimes such as Emir, MiFID II and SFTR,” said Douglas. “The Commission would like to take out the similar reporting requirements out of these individual regulations and put them in a single place.”
The regulatory reporting mandate from the European Market Infrastructure Regulation for derivatives came into force in February 2014. MiFID II comes into effect in January 2018 and SFTR, which includes securities lending, is slated for the second half of 2018.
Douglas added this is a long-term vision but the European Post Trade Forum is due to issue a report for public consultation this year. He continued that the absence of standards has led to poor data quality. For example, Emir originally mandated that each side of a derivatives trade had to report a transaction to a trade repository.
“When trades were reported to separate trade repositories, 80% were unmatched,” added Douglas. “If they are reported to the same trade repository, then 97% match.”
Last September Valdis Dombrovskis, the European Commissioner who has responsibility for Financial Stability, Financial Services and Capital Markets Union, said in a speech that the Commission is reviewing whether the quantity of reporting obligations can be safely decreased.
Steven Maijoor, chair of the European Securities and Markets Authority, said in a speech last June that Esma learnt a lot from Emir when reporting was introduced in a “big-bang way” and aims to structure SFTR reporting and data collection so that the industry only needs to make limited updates to their systems to ensure compliance.
“The co-legislators have also clearly indicated their intention to minimise additional operational costs for market participants by building on pre-existing infrastructures, and operational processes and formats which have been introduced with regard to reporting derivative contracts to trade repositories,” said Maijoor. “In that context, Esma, to the extent feasible and relevant, is mandated to minimise overlaps and avoid inconsistencies between the technical standards adopted pursuant to SFTR and those adopted pursuant to Article 9 of Emir.”
In addition Esma is also looking to standardise SFTR reporting requirements with MiFID II.
“To be clear, this doesn’t mean that all the data fields reported under SFTR, Emir and MiFID would be exactly the same, which would put into question why three reporting regimes were envisaged in the first place,” said Maijoor. “But where the same type of information is required, it should be as standardised as possible.”
