Do non-finance corporates need to fulfill EMIR reporting requirements?

The unfortunate truth is that unlike MiFID trade report regulations that went into effect in 2007 and was directed at financial firms, even non-financial firms in the European Economic Area (EEA) are under the jurisdiction of EMIR reporting.

Put in effect in February 2014, the European Markets Infrastructure Regulation, better known as EMIR, is a set of reporting requirements for over the counter (OTC) and exchange traded derivatives (ETD). Asset classes falling under the class of derivatives to be reported include commodities, equities, currencies, precious metals and interest rate products. As such, companies like those with global client bases that use foreign exchange swaps to hedge currency risk are now finding themselves under the jurisdiction of EMIR.

For non-financial firms, referred to in the EMIR framework as non-financial counterparties (NFC), this has meant that they have to report their OTC derivative and ETD trades to a trade repository or have it done in their behalf through a third party.

As one can imagine, prior to the rules being put in place in 2014, EMIR was viewed as a potential corporate headache waiting to happen for many firm.

Can your partners help?

Luckily, for many NFCs, the move to EMIR compliance has come ‘With a little help from my friends’.

Many banks that provide derivative trading services for their corporate clients such as interest rate and currency swaps and forwards include EMIR reporting on the behalf of their clients for free. However, this solution only works if an NFC uses one bank for their trades.

The good news though is that even firms where their banks aren’t reporting on their behalf, if they are using a corporate treasury platform it may provide an efficient solution. Used by treasury departments to monitor their derivative trades, analyze exposure and manage risk and cash flow, corporate treasury solutions produce reports that cover much of what is needed for EMIR. In addition, a variety of treasury solution vendors have integrated their systems with a TR or EMIR service provider to offer automated reporting.

Everyone else?

For corporates using banks that don’t report for them or have a treasury solution, compliance is possible, but is a bit harder.

The path to EMIR starts with registering to receive an LEI. Standing for Legal Entity Identifier, an LEI is a unique 20 character alphanumeric code that is used to identify parties in a derivative trade. Currently there are over 400,000 registered entities with their own LEI from nearly 200 countries. Costing around $20 for an annual registration, NFCs need an LEI to enable them to submit trades using this code for EMIR reporting.

Once having the LEI, the next step is choosing a trade repository (more on TRs). After selecting a TR, firms need to review the data reporting requirements of the repository. Required fields include information such as asset type, counterparty, trade size, buy or sell, and execution time. This data can then be saved as a .CSV file and updated to the TR through their web based interface.

Not easy

Unfortunately, formatting a derivative trade within a TRs reporting fields is rarely a simple matter. As a cross asset framework, over 100 separate fields of information exist in EMIR reporting files. However, an NFC may only need to fill out 20 of those, with the others remaining blank. This process of what data to submit and where is typically the area of the most friction when NFCs report to a TR by themselves.

The good news is that third party service provider such as Cappitech do exist that can help NFCs with their EMIR requirements even if their bank isn’t reporting on their behalf or they don’t have a treasury solution that integrates with a TR for automatic reporting.

If you a non-financial firm that doesn’t yet report for EMIR, and seeking a low cost and hassle free solution, Cappitech can help. LEARN MORE

Featured image Rock Cohen via Flickr

 

 

Ron Finberg
About the author: Ron Finberg
Ron is a Product Specialist Director at Global Regulatory Reporting Solutions, S&P Global Market Intelligence and helps customers with their compliance of EMIR, MIFIR, SFTR, MAS and ASIC derivative reporting. Ron is an ongoing contributor of regulatory focused content and webinars and leverages his over 20 years’ experience in the financial industry. He was also awarded the Editor’s Recognition Award for Best RegTech Vendor Professional in the RegTech Insight Europe Awards 2021.