The Financial Conduct Authority (FCA) has published two factsheets setting out its review findings relating to implementation of the regulation on over-the-counter derivatives, central counterparties and trade repositories (EMIR). The factsheets cover:

• EMIR reporting – is the industry ready?  The FCA wanted to find out how ready the industry was for the reporting obligation which started on 12 February 2014 and to identify challenges that could affect the completeness and accuracy of the reports.  The FCA says that, overall, it appears that most firms will be reporting their derivative contracts from the start date.  However, there may be issues for example with:

o Reporting channels for smaller firms who wish to delegate reporting in that not all of their dealing counterparties have yet decided whether to offer delegated reporting;

o Backloading as firms will need to retrospectively allocate identifiers to old trades;

o Unique Trade Identifiers (UTIs) as it is unclear who should generate this and as a consequence some UTIs may need to be changed once reported;

o Legal Entity Identifiers (LEIs) as not all counterparties have yet applied for one; and

o Identity of clients and counterparties outside the EU, as in some jurisdictions to do so may breach certain local legislation.

• Non-financial counterparties subject to EMIR.  The review covered how NFCs (including NFCs which are part of a group with Financial Counterparties) defined their hedging activity and monitored their status against the clearing threshold.  The findings identified:

o How NFCs accurately classify hedging and non-hedging transactions;

o Additional points for NFCs which are part of a group including FCs; and

o Points that NFCs delegating EMIR obligations to FCs within their group should consider to comply with EMIR

Related link:

http://www.fca.org.uk/firms/markets/international-markets/emir/implementation-reviews