Automating EMIR regulation reporting: Static vs Dynamic Data
One of the challenges of compliance reporting for financial transactions such as EMIR, Dodd-Frank and MiFID is the collection and reformatting of trade records to fit the data requirements of regulators. Fortunately though, once it is understood how a firm’s trade records fit within the information require to be reported, a lot of the daily process can be automated.
At Cappitech, we apply this philosophy for our Capptivate Platform which is used to automate reporting for the EU’s EMIR derivative reporting regulation. Unlike other similar transaction reporting regimes, by being set as a double-sided, instead of single-sided reporting framework, EMIR has cast a massive web of both financial and non-financial firms that fall under its requirements (more on double-sided reporting).
In order to improve efficiency when creating our process for how to automate transaction reports as well as reduce ongoing manual involvement, a strategy we use is to first map out what is the dynamic and static data.
Static vs dynamic data
In any repetitive process, whether its reporting derivative trades for EMIR, or simply sending a similar email to 50 customers, there will almost always be overlapping information that can be recycled from one action to the next. This type of static data contrasts with dynamic information which changes and is different for each email or transaction report.
When it comes to EMIR reporting, one of the first things we determine for our Capptivate customers is what data points is static and doesn’t change based on different transactions. By storing such data sets, it allows us to recycle this information and reduce the amount of data and potential mistakes that could take place when reporting each separate trade.
Examples of static data are a collection of counterparty LEI (legal entity identifier) numbers, ISIN codes for commonly traded assets, country location, execution venue market identifiers and asset type.
On the other side of the spectrum is dynamic data which changes from trade to trade and needs to be collected and reported to comply with EMIR regulation. Unlike static data, dynamic data provides the ‘meat’ of what regulators aim to discover when they created EMIR, and is used to calculate total derivative exposure and match those values to understand counterparty and systematic risk (more on what is EMIR).
Key dynamic data that needs to be collected on a per trade basis include price, valuation, individual trade number (better known as the unique transaction identifier/UTI), trade date, action type (new trade, closed, cancelled, etc) and collateral values.
Overall, how companies go ahead and create processes to use automation for transaction reporting varies between firms. But, an important element is first focusing on creating a strong infrastructure of what and how data is collected to be then handled to be reported.
If your firm needs to report for EMIR regulation and you are interested in integrating automation for the derivative reporting, Cappitech is ready to help. Contact us for a quick consultation to learn how we can reduce your headaches and lower your per trade transaction costs.