ESMA fines DTCC €64K over EMIR Violations in its EU Repository

ESMA sees its first action against a trade repository in Europe post-EMIR.

The European Securities and Markets Authority (ESMA) announced today a fine of €65,000 against DTCC Derivatives Repository Limited (DDRL), owned by DTCC, in connection with violations of EMIR rules during a nine-month period and across 2.6 billion reports, according to the agency’s official press release.

The ESMA said that the violations stemmed from negligence in the company failing to put in place data processing systems that were capable of providing regulators with direct and immediate access to the reported data, as well as not informing the ESMA in a timely manner after becoming aware of the issues, and because of taking three months to implement an effective remedy while the matter had worsened.

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ESMA became aware after delays

The period in question was from 21 March 2014 to 15 December 2014, after the ESMA become aware of the delays, and said the findings revealed systemic weaknesses in the company’s controls and procedures, among other areas concerning trade reporting.

Considering the scope of DTCC’s global businesses, the matter could be seen to be reflective of some of the challenges that firms have faced while attempting to comply with new requirements in recent years regarding trade reporting under the evolving EMIR legislation.

A diverse number of regulatory compliance providers have since emerged to help cater to the needs of companies such as DTCC and other institutions with trade repository or other EMIR related reporting obligations.

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“…matters addressed in 2014.”

 

The action is the first of its kind against a registered Trade Repository (TR) in Europe as there are only six that have been registered to-date by the ESMA. There could be more to come if the regulatory prepares further related actions against other TRs. Finance Magnates reached out to both the ESMA and DTCC around the time of publication for comments.

Shortly after publication, a DTCC spokesperson shared with Finance Magnates: “DTCC continues to work closely with ESMA and with regulators around the world to ensure the timely submission of derivatives trade data in support of G20 goals. DTCC is unable to provide further comment on the report, for matters addressed in 2014.”

A spokesperson from ESMA explained that the size of the fine was based on the current legislation which imposed a particular amount on a per breach basis, and which accounted for the €44K related to three breaches and with the other €20K tied to the size of the related turnover volume. The TRs were developed in response to the crisis in an effort to create transparency and accurate reporting in the derivatives markets, and so ESMA had taken the related breach quite seriously despite the size of the fines which were capped from the current legislation. ESMA had previously responded to a recent review by the European Commission (EC) where the levels of the fines were in question and hinting that higher penalties could be enacted if the EC succumbed to the considerations.

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