LONDON, June 14 (IFR) - Revised European rules for
over-the-counter derivatives reporting, set to become effective
on November 1, could hamper readiness for sweeping MiFID II
requirements that come into play just two months later, market
participants have warned.
An overhaul of regulatory and implementing technical
standards (RTS/ITS) for Article 9 of the European Markets
Infrastructure Regulation aims to improve data clarity in OTC
swaps reporting, which came into effect in February 2014.
Updated Level III text was submitted by the European
Securities and Markets Authority in late 2015 and adopted by the
European Commission a year later.
"There's no lack of clarity over what needs to be done but
the industry is largely underprepared for the scale of the
changes," said Collin Coleman, head of NEX Regulatory Reporting,
a transaction reporting platform that uses technology from Abide
Financial, which was acquired by the NEX Group last October.
"Simply looking at this as a technical change is the wrong
way as the industry is going to have to report twice as many
fields and almost 80% of the fields are new, or changed."
As part of the overhaul, derivatives counterparties will be
required to make fundamental changes to database structures in
order to manage an array of changes that include additional data
on the type of trading model used in each transaction. Analysis
by Abide shows that the rewrite comprises 51 new fields, 22
amended fields and seven deletions.
A rush for compliance could have a knock-on effect for MiFID
II preparations, Coleman said, with the sweeping requirements
for pre and post-trade transparency across securities and
derivatives markets set to go live on January 3.
"Even in an organisation of moderate complexity, you've
probably got five to 10 systems that need to be updated, so it’s
a big upheaval and could have a significant impact on MiFID II
preparations," said Coleman.
Already delayed by one year, regulators see no scope for
extending the MiFID II deadline.
"Contrary to some recent coverage and commentary, MiFID
II/MiFIR will come into effect on January 3 2018, there will be
no further delay in its implementation," chair of the European
Securities and Markets Authority Steven Maijoor said at the
FIA's IDX conference in London last week. "One delay has been
enough for all concerned."
EMIR reporting changes come into effect as European
policymakers embark on a broader review of regulation that
entered into force in 2012. As part of the EMIR review,
published last month, the European Commission proposed a change
to the controversial dual-sided reporting requirement that
requires both parties on an transaction to report their trade to
a registered repository.
Under new recommendations - yet to be approved by the
European Parliament and European Council - non-financial
counterparties would cease to be subject to swaps reporting,
instead handing responsibility over to their financial
"For small and medium-sized firms doing FX hedging, it's a
very big lift to meet the changes to the RTS/ITS in November,
particularly if the wider macro EMIR review leaves them out of
scope altogether," said Coleman.
NEX Regulatory Reporting, which went live earlier this year,
has around 135 buyside and sellside clients accessing its
global regulatory reporting services.
(Reporting by Helen Bartholomew)