Regulatory Reporting Landscape

Transcription

1 Regulatory Reporting Landscape Fabian Klar, Relationship Management Europe Cyprus, January 27 th 2016

2 New regulations are already on the radar, with the application of major regulations in 2018 TODAY 12 February October 2015 Q3 2017* 3 January 2018 Q4 2018** EMIR Reporting of derivative transactions, both OTC and ETD, to a Trade Repository ( TR ) REMIT Reporting of wholesale energy products to ACER through a RRM FinFraG EMIR-like reporting requiring Swiss counterparties to report derivative transactions MiFID II /MiFIR Reporting of transactions to home competent authorities SFTR Reporting of repos and sec/commodities lending/borrowing activities to a TR Implementation of further Swiss rules based on internal standards (e.g. Federal Financial Services Act FinSA, exp. in 2018) * Estimated date. Subject to changes ** Estimated date according to Regulation (EU) 2015/2365 of 25 November Reporting requirements (Art. 4) apply from 12,15,18 and 21 months after the relevant RTS come into force 27 January

3 mainly due to unshared UTIs between counterparties, accounting for up to 50% of unreconciled trades Reasons for failure of inter-tr reconciliation 304,890,384 41% 95,920,459 13% Main reasons: Large number of trades not reconciled because of unshared UTI values between counterparties Failure of one counterparty to report / report in a compliant manner (e.g. incorrect format, different values etc.) Issues related to TRs mainly due to process inefficiences and syntax errors 347,840,256 46% Main activities Remedial action plan currently being implemented by TRs, estimated to be finalised in Q Issues related to TRs (e.g. syntax errors, wrong classifications of trades, not timely exchange of requested list of failure to find the pairs) Issues related to counterparties (i.e. failure to exchange UTI, while rest of transaction details are aligned) Other various issues (e.g. failure to conform reporting obligation by one counterparty, failure to include a trade into request list by a TR etc.) Action plan including improvements related to the file and content of the files exchanged as well as to the process Regulators putting more pressure on supervised entities to improve data quality New technical standards becoming legally binding for counterparties (i.e. Revised EMIR RTS/ITS under Article 9) 27 January * Source: ESMA s supervision of credit rating agencies and trade repositories annual report and 2016 work plan, February 2015

4 Aggregated data quality Reported data quality demanding efforts from all stakeholders to achieve improved data quality and increased standardisation Level 1 validation rules - EMIR Level 2 validation rules - EMIR Potential EMIR Review* Revised RTS/ ITS on EMIR reporting** New validation rules to ensure that the data reported to TRs is complete to the extent possible (i.e. completeness validations) New validation rules including cross validations to ensure that the data reported is accurate (i.e. content validations) European Commission to put forward proposals to amend EMIR as part of the Commission s broader review into EU financial services regulations Revised technical standards to incorporate the most relevant of the Q&As addressing existing deficiencies and introduce additional fields and values Inter-TR reconciliation analysis The Trade Repositories Project Revised EMIR RTS Article 81** Implementation of a remedial action plan by TRs (exp. Q2 2017) to improve the process of inter-tr reconciliation as well as the format and content of the files exchanged Development of a centralised portal enabling NCAs to submit and access data queries in a common technical format. Phase 2 will be implemented in Q3/Q4 17 Provision of operational standards for TR data access as well as data aggregation and comparison across TRs, including implementation of ISO * Estimated date ** Exact timeline is subject to the publication of the revised RTS/ITS on Article 9 and Article 81 under EMIR in the Official Journal of the European Union 27 January

5 With a lot of efforts done on a cross-jurisdictional and regulatory basis to achieve more efficient reporting Growing number of information required leading to an increased need for common reporting requirements MiFIR # 65 SFTR** #143 FinfraG # 79 Reportable fields REMIT # 58 EMIR* # 129 CPMI IOSCO working on guidelines in order to create some standardisation for Unique Transaction Identifier ( UTI ), Unique Product Identifier ( UPI ) and other key data elements. Several consultation papers have been published since 2015 Mandating the use of ISIN** code for derivative product identification across regulations. Ongoing global initiatives to provide guidance on the allocation of ISINs for derivatives Mandating LEI (ISO 17442) for legal entity identification (e.g. submitting/reporting entity) across regulations. LEIs issued by Local Operating Units ('LOUs') of the Global LEI System * Based on new EMIR RTS/ITS (ESMA Final Report November 2015) ** Based on the SFTR Consultation Paper (30 September 2016). Not all data is reportable for each action type and relevant SFT type XML templates based on ISO methodology implemented by TRs under EMIR in the context of the TRACE project and imposed by the revised technical standards under Article 81. Current assessments undergoing for evaluating the implementation of ISO as a standard message for all communication flows (counterparties TRs authorities). Existing provision for the use of ISO under MiFIR. Consulting groups for the implementation of ISO for SFTR have recently started 27 January

6 EMIR lessons learned Key success factors in the context of trade reporting Provide sufficient prescriptive guidelines to ensure a harmonised way to populate fields Regulators Enhanced standardisation to facilitate aggregation of data across TRs and help improve TR data quality Embracement of standard messaging and agreed industry processes Understand your obligations under the reporting framework to ensure compliance and continuously monitor for regulatory updates Market Participants Start the process early to understand the flows. Put in place a project plan and use the time provided for the implementation of reporting systems Analyse strategic ways of reporting (in-house solution vs. delegation) without neglecting your reporting responsibilities Understand clients needs and adapt to different client profiles Trade repositories Closely work with regulators to understand and be compliant with their requirements Build an agile and flexible infrastructure, allowing to efficiently cope with regulatory changes 27 January

7 Mandatory developments Incremental enhancements REGIS-TR Product Roadmap Upcoming developments and releases SUBJECT TO CHANGE Superuser Live since Sept Additional UAT environment Expected in Q Multiregulatory GUI Expected in Q SFTR TR reporting Expected Q New Website Live since Nov FinfraG TR reporting Expected in Q MIFID II /MiFIR 3 January Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Q4 Mergers & Acquisitions* Expected Q1/Q Delegation Controls Expected Q Reconciliation status and report changes Expected end Q ESMA Level 2 adjustments Expected Q Revised EMIR RTS/ITS Expected Q TR Project (Phase 1) Live since August 2016 Inter-TR Reconciliation Expected Q TR Project (Phase 2) Expected Q January

8 REGIS-TR Product Roadmap addressing market challenges and customer needs INTER-TR RECONCILIATION - Implementation of a remedial action plan by TRs to improve the process, formats and content of inter-tr reconciliation SUPERUSER - Aggregated view of data across multiple Reporting Participant and Non Reporting Entity accounts ADDITIONAL UAT ENVIRONMENT Additional environment with the same functionalities to the Production environment TR PROJECT Establishment of a centralised hub facilitating the submission of data queries by competent authorities to TRs INTER-TR PROJECTS ENHANCED SERVICES MULTIREGULATORY GUI Single interface and connectivity allowing for facilitated reporting across regulations TRANSITION MANAGEMENT TOOL Suite of service support provided to clients wishing to migrate to REGIS-TR NEW EMIR RTS/ ITS - Clarification of data fields; adaption of reporting logic and introduction of new fields and values reflecting market practice and requirements ENHANCED AND NEW REPORTING FUNCTIONALITIES Adjustments of ESMA s Level 2 approach; other ESMA change requests and REGIS-TR reporting adjustments ENHANCED REPORTING PRODUCT LAUNCHES FINFRAG/ FMIA Swiss EMIR-like reporting impacting Swiss market participants trading in derivatives SFTR Reporting details on Securities Financing Transactions through an ESMA approved Trade Repository DELEGATION CONTROLS Strengthened system control to identify unauthorised reporting MIFID II / MIFIR Transaction reporting (Article 26) services 27 January

9 Zoom on SFTR Key regulatory reporting requirements Trade repository reporting is estimated to begin Q with a phased-in approach depending on the counterparty classification January 2016: Entry into force of SFTR Q Submission of RTS by ESMA within 12 months after the entry into force of SFTR Expected by end of March 2017 Q Estimated entry into force of final RTS Depending on adoption and scrutiny period Q Reporting start date for investment firms and credit institutions (12 months after the application of RTS) Q Reporting start date for CCPs and CSDs (15 months after the application of RTS) Q Reporting start date for other financial counterparties: insurance/reinsurance undertakings, UCITS ManCos; AIFM (18 months after the application of RTS) Q Reporting start date for non-financial counterparties (21 months after the application of RTS) PHASED-IN APPROACH What is SFTR? SFTR = Securities Financing Transaction Regulation Drawn on EMIR implementation infrastructure and supervised by ESMA Investment firms Credit institutions Insurance companies Aims at providing increased transparency on the use of securities financing transactions in the market Entities in scope UCITS management companies and AIFMs Institution for occupational retirement provision Central counterparties Geographical scope Applies to all EU financial and non-financial counterparties Including all branches irrespective of their location Third country entities are also required to report, if the SFT is concluded by an EU branch Central securities depositary Non financial companies EXEMPTION: counterparties entering into SFT transactions with the European System of Central Banks ( ESBC ) 27 January

10 T+1 Trading day Delegation possible Zoom on SFTR Key regulatory reporting requirements The reporting shall be submitted to a trade repository registered in accordance with EU regulation EMIR Reporting obligations fall on both counterparties Reporting process However, delegated reporting is possible EXCEPTION: Financial counterparty has to report on behalf of a small non-financial counterparty Fund managers on behalf of their funds Maintain record min. 5 years (conclusion, termination and modification) Reporting on T+1 basis Count A 3 rd entity A Delegation possible 3 rd entity Trade Repository Count B 3 rd entity B Delegation possible Repurchase transactions Lending and borrowing transactions Publish aggregate positions by type of SFT Product scope Sell/Buy back transactions Margin lending transactions Etc. Does not include derivatives as under EMIR ESMA On demand Transaction Delegated reporting Supervisors/Regulators* Excluded in the scope of MIFID II Details to report Parties to the SFT, principal amount, currency, assets used as collateral, quality and value etc. LEI, ISIN, UTI 27 January

11 Disclaimer "This presentation is prepared for general information purposes only. The information contained herein is not intended to provide professional legal advice and should not be relied upon in that regard. Readers should seek appropriate professional advice where necessary before taking any action based on the information contained in this document. REGIS-TR, S.A. makes no guarantees, representations or warranties and accepts no responsibility or liability as to the accuracy or completeness of the information, and under no circumstances will it be liable for any loss or damage caused by reliance on any opinion, advice or statement made in this document. Information in this document is subject to change without notice." 27 January

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