FIA Calls for Changes to Derivatives Reporting Under EMIR

Trade association FIA has recently published a report, calling for changes in the way relevant firms need to report Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. Read this Term-traded derivatives (ETDs), claiming that the current framework has created many difficulties for reporting firms.

Back in 2009, the G-20 Pittsburgh Summit introduced a global framework in order to protect the financial market against another financial crisis. From this framework, reporting regulations for over-the-counter (OTC) derivative contracts was introduced in order to better understand counterparty risks and exposure.

While well-intentioned, the FIA explains in its report published in June that different approaches across the world have resulted in complex and conflicting Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges. Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges. Read this Term, making it harder for firms.

FIA outlines problems in EMIR regulation

In its report, the FIA highlights that Europe’s European Market Infrastructure Regulation (EMIR) regulation is particularly unique. This is because it requires dual-sided reporting and includes OTC and ETD transactions. As highlighted by the association, the reporting standards were created for OTC trades but are also being used for ETDs.

“However, the application of a single reporting framework applying to both OTC and ETD contracts, which are fundamentally different products, has resulted in regulatory ambiguity and challenges to report complete and accurate data,” the report states.

In order to make this process more efficient, FIA recommends in its report to modify the legislation in order to allow EU regulators the authority to allow reporting firms to submit ETD position reports and remove the obligation to report transaction-level details.

“This would significantly reduce the number of reports submitted by entities trading in ETD contracts without impacting the regulator’s ability to conduct analysis of systemic risk in ETD markets. Furthermore, this would reduce the operational burden faced by reporting firms, whilst enabling firms to enhance remediation capabilities on key data issues.”

Will ESMA take FIA’s comments onboard?

FIA is not the first to criticize the EMIR regulation. In fact, in 2017, the European Commission identified issues with ETD reporting as well, and the International Swaps and Derivatives Association (ISDA) has also called for changes.

Speaking to Finance Magnates, Ron Finberg, Business Development at Cappitech said: "Via the EU's 2017 EMIR review and EMIR Refit this year, it shows that ESMA is analyzing the effectiveness of EMIR and have shown they are willing to make some changes to it.

"In 2018, one of their big campaigns was working with local regulators to review EMIR data for quality assurance reasons. This exercise revealed a number of different problems that exist in the market and may make them more open to the FIA's recommendations in the future."