EU Trade Repository Matching Disrupted by EMIR Overhaul

The European Union's overhaul of trade reporting rules under EMIR has severely disrupted data matching between trade repositories, leading to a significant increase in mismatched derivatives trades. This ongoing issue impacts firms' ability to reconcile data and could have implications for capital requirements and regulatory compliance across the financial sector.

EMIR Overhaul Causes Data Disruption

Recent changes to the European Union's trade reporting rules, known as EMIR Refit, have led to widespread disruption in data exchange between trade repositories (TRs). For several months, TRs responsible for collecting and storing derivatives trade details ceased exchanging data, resulting in a surge of unreconciled derivatives trades. While some sources indicate that data flow is resuming, others report persistent problems with inter-TR reconciliation.

Key Takeaways

• The EMIR Refit has caused a significant increase in mismatched derivatives trades.
• Trade repositories experienced a multi-month halt in data exchange.
• The disruption affects firms' ability to reconcile trade data.
• Unreconciled trades could impact capital requirements and regulatory compliance.

Impact on Firms and Capital Requirements

The inability to effectively match and reconcile derivatives trade data poses substantial challenges for financial firms. Accurate data reconciliation is crucial for regulatory compliance and for calculating capital requirements. Mismatched trades can lead to discrepancies in reported positions, potentially resulting in higher capital charges or regulatory penalties. The ongoing issues highlight the complexities of implementing new regulatory frameworks and the critical need for robust data infrastructure.

Broader Regulatory Landscape

This disruption occurs amidst a broader push for regulatory reform in derivatives markets. The Bank of England, for instance, is developing new, more adaptable rules for UK clearing houses, aiming to simplify and improve upon previous EU legislation. Meanwhile, the EU is considering expanding its clearing mandate, potentially bringing more funds and financial entities into mandatory clearing requirements. The challenges faced with EMIR Refit underscore the difficulties in harmonizing and implementing complex financial regulations across different jurisdictions.

Sources

• Bank of England wants dynamic Emir for UK clearing houses, Risk.net.
• Snap! Derivatives reports decouple after Emir Refit shake-up, Risk.net.
• Complex EU active account reporting could drive trades out of UK, Risk.net.
• Shock EU expansion of clearing mandate may hook more funds, Risk.net.
• EU trade repository matching disrupted by Emir overhaul, Risk.net.