As of 12 February 2014, the EU’s European Market Infrastructure Regulation (EMIR)¹ has required parties to derivatives contracts to report their derivatives contracts to a trade repository (EMIR reporting). The data on derivative contracts in trade repositories are made available to the FIN-FSA and other authorities for supervision of the derivatives market. Data from trade repositories is increasingly used in supervision as different authorities move towards a more data-driven approach to supervision, and therefore more attention is also being paid in supervision to the high quality of data². In its recent supervisory practice, the FIN-FSA has observed some significant inadequacies³ in EMIR reporting and therefore further reminds Finnish entities separately of their EMIR reporting obligations.

What is EMIR reporting?

Article 9(1) of EMIR requires counterparties to derivative contracts to ensure that the details of any derivative contract they have concluded and of any modification or termination of the contract are reported to a trade repository. The details must be reported to a trade repository no later than the working day following the conclusion, modification or termination of the contract.

EMIR reporting applies both to financial counterparties, as separately defined in the Regulation, and to non-financial counterparties, i.e. to all other entities that enter into derivative contracts. It is also worth noting that details must be reported not only of over-the-counter (OTC) derivatives – such as interest rate and currency swaps – but also of listed derivatives. Details of securitised derivatives such as warrants need not be reported, however.

Details of derivative contracts are not reported to the FIN-FSA, but to a trade repository registered or recognised under the Regulation. The European Securities and Markets Authority (ESMA), which supervises trade repositories, maintains a register of such trade repositories. More detailed information of the content of the reporting is available of ESMA’s website.

Double side reporting

EMIR reporting is double-sided, meaning that both parties to a derivative contract are obliged to ensure that they fulfil their reporting obligation on their own behalf. In practice, there is one notable exception to this double-sided approach: According to Article 9(1a) of EMIR, a financial counterparty has a reporting obligation on behalf of both parties when it enters into an OTC derivative contract with a non-financial counterparty that is not subject to the clearing obligation⁴ under the Regulation. A notable feature of this exception, however, is that it is not applicable to listed derivatives.

In practice, however, parties subject to the reporting obligation are not themselves required to report the details of their derivative contracts to a trade repository. Article 9(1f) of EMIR allows a counterparty to delegate the reporting to the other party to the derivative contract or to a third party, such as a reporting service provider. Delegating EMIR reporting in this way does not, however, remove the responsibility of a party subject to the reporting obligation to ensure that the details are, in practice, correctly reported to the trade repository, as both the European Commission and ESMA have emphasised⁵.

Group exception

There are no exceptions to EMIR reporting due to, for example, the low level (number or nominal value) of a party’s derivative contracts. The only exception is that groups where the parent company is a non-financial counterparty may, under certain conditions, not report intra-group derivative contracts. The FIN-FSA must also be notified in advance of the use of the exception. The European Commission has, however, also proposed to remove this exception⁶.

For further information, please contact:

• Jyrki Manninen, Chief Legal Adviser, jyrki.manninen(at)fiva.fi or tel. +358 9 183 5205
• Juho Westerlund, Senior Supervisor, juho.westerlund(at)fiva.fi or tel. +358 9 183 5310

¹ Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories.
² ESMA finds data quality significantly improves under new monitoring approach (europa.eu).
³ Administrative fine imposed on S-Bank Plc for failures in reporting on derivatives contracts and Administrative fine for Ålandsbanken Abp for inadequacies in reporting of derivative contracts.
⁴ For more on EMIR, including the clearing obligation, see EMIR - Regulatory framework - www.finanssivalvonta.fi.
⁵ There are no specific provisions on the delegation of the reporting obligation, but the European Commission (see II.4 EMIR: Frequently Asked Questions) and ESMA (see TR Question 8 Questions and Answers Implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)) have emphasised that, irrespective of delegation, the counterparty itself is still responsible for reporting.
⁶ Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets, COM/2022/697 final, EUR-Lex - 52022PC0697 - EN - EUR-Lex (europa.eu).