Trade Repository Compliance with EMIR and SFTR

Trade repository compliance with EMIR and SFTR is a complex process that requires careful attention to detail. EMIR, the European Market Infrastructure Regulation, mandates the reporting of derivatives trades to a trade repository, while SFTR, the Securities Financing Transactions Regulation, requires the reporting of securities financing transactions.

The EMIR regulation applies to all derivatives transactions, including options, futures, and swaps, with an original maturity exceeding two years. This means that any company involved in derivatives trading must report these trades to a trade repository.

Trade repositories are responsible for collecting and storing this data, which is then made available to regulators and other stakeholders. SFTR, on the other hand, focuses on securities financing transactions, such as repo and stock lending, and requires the reporting of these transactions to a trade repository.

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To get registered as a trade repository, you'll need to go through a highly formalised process, where ESMA assesses the information you provide against their technical standards.

The first step is to prepare your application file, for which ESMA has issued a guidance document that's worth reading before you start.

ESMA uses this process to decide whether you comply with EMIR and SFTR requirements.

You can find a list of ESMA-registered trade repositories on their website, which includes those registered under EMIR and SFTR.

If you want to offer services related to UK EMIR or UK SFTR in the UK, you'll need to be registered with or recognised by the FCA.

Your application will be assessed according to the usual procedures in UK EMIR or UK SFTR.

Here's a list of ESMA-registered trade repositories:

Trade repositories (TRs) are subject to ongoing supervision by the European Securities and Markets Authority (ESMA) to ensure compliance with EMIR and/or SFTR regulatory requirements.

ESMA uses a risk-based framework to supervise TRs, which involves a combination of desk-based activities and investigations.

Desk-based activities include monitoring data submitted by TRs, analyzing complaints received by market participants, and reviewing notifications made by TRs of material changes to their registration conditions.

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TRs are requested to submit information to ESMA in accordance with the Guidelines on periodic information and notification of material changes.

The Guidelines clarify the format and frequency of the different categories of information expected from TRs, and are supplemented by relevant templates.

These templates include governance, business, financials, and fees templates, internal control templates, data reporting templates, and IT and information security templates.

ESMA has the power to take enforcement action if a breach of the EMIR or SFTR Regulation is discovered, including imposing fines or withdrawing registration.

You can find more information on ESMA's current supervisory focus in their annual report and work programme or ad-hoc reports.

Here are the templates used by TRs when submitting information to ESMA:

To offer services related to UK EMIR or UK SFTR in the UK, a trade repository (TR) needs to be registered with, or recognised by, the Financial Conduct Authority (FCA). Your application will be assessed in accordance with the usual procedures.

The FCA maintains a list of registered TRs, which can be found on their Financial Services Register. This list is updated as necessary and includes TRs registered to operate under UK EMIR and UK SFTR.

Here are some registered TRs under UK EMIR and UK SFTR:

If you're looking to comply with EMIR and SFTR requirements, understanding the technical requirements is crucial.

UK SFTR reporting counterparties and TRs should use the UK SFTR validation rules to submit securities financing transactions entered into from 11pm on 31 December 2020 onwards.

To ensure your firm is compliant, you can find a note highlighting our expectations for firms in relation to their UK SFTR reporting requirements immediately following the end of the transition period.

The registration and extension of registration processes are highly formalised and involve assessing information provided by applicants.

ESMA issued a Guidance on registering TRs to help firms prepare their application files.

You can find the list of ESMA registered TRs, which includes TRs registered in accordance with EMIR and SFTR.

Here is a list of the types of TRs registered with ESMA:

To get SFTR registration, you'll need to be registered with, or recognised by, the FCA. This is a requirement for any Trade Repository (TR) offering services related to SFTR in the UK.

The FCA assesses applications in accordance with usual procedures in SFTR. If your application is successful, you'll be able to operate under SFTR in the UK.

DTCC Derivatives Repository Plc is the only TR currently registered to operate under UK SFTR in the UK. This list may be updated as necessary and does not supersede the Financial Services Register.

You can find more information on the registration process, including relevant regulatory provisions and technical standards, on the ESMA website. This includes documents on applications for registration and extension of registration of TRs under SFTR.

If you're preparing to apply for SFTR registration, it's recommended that you read ESMA's Guidance on registering TRs to help with your application.

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EMIR and SFTR are two separate regulations that aim to improve transparency and risk management in the financial markets. EMIR requires the reporting of over-the-counter (OTC) derivatives transactions to a trade repository, while SFTR extends this requirement to securities financing transactions.

EMIR was introduced in 2012 to regulate OTC derivatives, which were not subject to the same level of transparency as exchange-traded derivatives. SFTR, on the other hand, was introduced in 2019 to regulate securities financing transactions, such as securities lending and repo transactions.

The two regulations have different reporting requirements and timelines. EMIR requires the reporting of OTC derivatives transactions within one day of the transaction date, while SFTR requires the reporting of securities financing transactions within one hour of the transaction date.

EMIR applies to all financial institutions that engage in OTC derivatives transactions, including banks, broker-dealers, and other financial institutions. SFTR applies to all financial institutions that engage in securities financing transactions, including banks, broker-dealers, and other financial institutions.

The two regulations have different penalties for non-compliance. EMIR imposes fines and penalties on financial institutions that fail to report OTC derivatives transactions, while SFTR imposes fines and penalties on financial institutions that fail to report securities financing transactions.

EMIR and SFTR require financial institutions to maintain accurate and detailed records of their transactions. This includes maintaining records of all OTC derivatives and securities financing transactions, as well as the counterparties to these transactions.

In summary, EMIR and SFTR are two separate regulations that require financial institutions to report their transactions to a trade repository. While EMIR regulates OTC derivatives transactions, SFTR regulates securities financing transactions.

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The UK EMIR and SFTR validation rules are crucial for firms to submit derivative transactions and securities financing transactions accurately. UK reporting counterparties and UK TRs should use the UK EMIR validation rules to submit derivative transactions entered into from 11pm on 31 December 2020 onwards.

These rules include references to future amendments to the rules which will apply from 8 March 2021. UK SFTR reporting counterparties and UK SFTR TRs should use the UK SFTR validation rules to submit securities financing transactions entered into from 11pm on 31 December 2020 onwards.

The UK EMIR and SFTR validation rules are designed to ensure compliance with regulatory requirements. Firms should use the UK EMIR validation rules and UK SFTR validation rules to submit transactions accurately and on time.

Here are some key points to note about the UK EMIR and SFTR validation rules:

The reporting obligation applies to all derivatives and every user thereof, meaning if you're a party to a derivative contract, you must report the contract to a Trade Repository.

Both parties to a derivative contract must separately report the details of that contract and any amendment or termination thereof, each to a Trade Repository of their choice. This applies regardless of whether the contract is traded on an exchange, MTF or over-the-counter.

The data must be reported no later than the working day following the execution of the transaction, amendment or settlement of the contract. Certain exceptions to the reporting obligation are possible in the case of intra-group transactions.

You can choose to report yourself, or outsource, with several options available, including reporting directly to the Trade Repository, agreeing with the other counterparty to assume both reporting obligations, or outsourcing to a third party.

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The reporting obligation applies to all derivatives and every user thereof, meaning if you're a party to a derivative contract, you must report the contract to a Trade Repository.

Both parties to a derivative contract must separately report the details of that contract and any amendment or termination thereof, each to a Trade Repository of their choice.

You can choose to report yourself or outsource, with several options available, including reporting directly, outsourcing to a third party, or using a Common Central Party.

The reporting obligation applies regardless of whether the contract is traded on an exchange, MTF, or over-the-counter, and regardless of whether it's subject to central clearing or bilateral clearing requirements.

Intra-group transactions are possible exceptions to the reporting obligation, but only if one of the parties is a non-financial party and the parent is not a financial institution or established in a third country.

The data must be reported no later than the working day following the execution of the transaction, amendment, or settlement of the contract.

For transactions involving both a financial and a non-financial counterparty, the financial counterparty will be responsible for both parties' reporting obligations, which concerns only small non-financial counterparties.

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Reporting frequency can vary depending on the type of report. Quarterly reports are typically required for publicly traded companies.

For example, the Securities and Exchange Commission (SEC) requires quarterly 10-Q reports from publicly traded companies. These reports must be filed within 40 days of the end of the fiscal quarter.

Some reports may be due annually, such as the annual 10-K report. This report provides a comprehensive overview of the company's financial position and operations.

The annual report must be filed within 60 days of the end of the fiscal year. This allows companies to finalize their financial statements and provide a detailed account of their business activities.

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If you're a UK registered Trade Repository, you can withdraw your registration by completing a form and emailing it to [email protected]. This process is straightforward and easily manageable.

We collect data on two main markets: derivatives and securities financing transactions. These are collectively known as the TR data collections, which cover the following areas:

If you're a UK registered Trade Repository and you want to withdraw your registration, you can do so by completing a specific form and emailing it to [email protected].

The form is available for you to download and fill out.

You'll need to submit the form to have your registration withdrawn.

The data collection process for TR data collections involves collecting data from derivatives markets and securities financing transactions. These markets are regulated by the UK European Market Infrastructure Regulation (UK EMIR) and the UK Securities Financing Transactions Regulation (UK SFTR).

Data is collected on five asset classes: interest rates, foreign exchange, commodities, credit default swaps, and equities. These transactions can be done bilaterally or through futures exchanges.

The Bank of England and the Financial Conduct Authority (FCA) share responsibilities for derivatives reporting. The Bank is responsible for the framework for derivatives reporting as they apply to central counterparties (CCPs), while the FCA is responsible for the reporting framework for all other counterparties.

UK firms report details of derivatives transactions on a daily basis. These reports cover the five asset classes mentioned earlier.

Here's a breakdown of the asset classes that are covered:

These reports provide valuable information for regulators and help maintain market stability.

Global Trade Repositories are crucial for firms to report their OTC derivatives transactions, SFT transactions, CCP Margin, and Collateral Reuse data to regulatory agencies. This is achieved through a global infrastructure of trade repositories that collect, store, and report the data.

The DTCC Global Trade Repository (GTR) service is a prime example, providing firms with a way to report their transactions to multiple jurisdictions. GTR has established trade repositories for reporting to various jurisdictions, making it a comprehensive solution.

For instance, GTR has separate trade repositories for reporting to the EU and UK under the SFTR (Secure Financial Transaction Reporting) regulations. This is evident in the GTR EU/UK SFTR section, which outlines the ingestion and reporting schemas for production trade data submission tools.

In fact, the GTR EU/UK SFTR section provides a Production Trade Data Submission Tool, which is a valuable resource for firms looking to report their transactions accurately. Additionally, the section includes Release Notes and Service Help, which can be useful for firms navigating the reporting process.

Here are some key features of the GTR service: