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Screenshot of a breaking news alert e-mail from Q2 2017
The FCA now recognizes six properly registered Trade Repositories for EMIR reporting.
If you’re a Forex, CFDs or Binary Options broker in Europe and you don’t yet have in place an EMIR reporting solution, better contact us fast….
A little spoken about but very important regulatory deadline for Europe-based Forex, Binary and CFD brokers has now passed. As of today (February 12), ESMA’s new European Market Infrastructure Regulation (or EMIR) rules go into effect. The enforcement of EMIR rules will be the first real test of ESMA’s powers as the new pan-Europe financial watchdog.
As we recently wrote, one of the key reasons leading to the withdrawal of Barclays from the retail Forex business was impending EMIR regulations. Barclays apparently felt that, given the volumes in their retail FX arm, it wasn’t worth the additional cost of becoming EMIR compliant. So this is indeed an important issue.
So what exactly is EMIR? And what does it require?
The main purpose of EMIR is to improve transparency and reduce the risks associated with the derivatives market. According to ESMA, the main obligations under EMIR are:
- Central Clearing for certain classes of OTC derivatives;
- Application of risk mitigation techniques for non-centrally cleared OTC derivatives;
- Reporting to trade repositories (the main topic of this article);
- Application of organisational, conduct of business and prudential requirements for CCPs;
- Application of requirements for Trade repositories, including the duty to make certain data available to the public and relevant authorities.
The main issue as far as brokers should be concerned is Trade Reporting, as we’ve highlighted above. EMIR introduces the obligation for all EU counterparties to derivative transactions to begin reporting daily to licensed Trade Repositories – a task which appears to be particularly burdensome and costly for most Forex and Binary Options brokers.
According to the FCA’s website, there are now six ESMA recognized and registered Trade Repositories:
- CME Trade Repository Ltd. (CME TR), based in the United Kingdom
- ICE Trade Vault Europe Ltd. (ICE TVEL), based in the United Kingdom
- DTCC Derivatives Repository Ltd. (DDRL), based in the UK
- Krajowy Depozyt Papierów Wartosciowych S.A. (KDPW), based in Poland
- Regis-TR S.A., based in Luxembourg, and
- UnaVista Ltd, based in the UK
Based on our (informal) polling of management at various EU-based forex and binary options brokerages, it seems as if most firms fall into one of two camps:
- We don’t think that EMIR really applies to us.
- We’re not sure how this will shake out, so we’re taking a wait-and-see attitude.
But neither camp seems to be ready for EMIR. And getting ready will likely involve some time and IT work to extract the data which will be required to report.
So what should brokers do?
LeapRate is working with leading regulatory advisory consultancy MAP S.Platis to provide our readers with the information they might need to make an informed decision on EMIR. We would encourage all EU brokers which do not yet have an EMIR reporting solution in place to download this brochure on EMIR and on MAP S.Platis’ MAP-ERS solution.
If you would like more information, or to be contacted by a member of MAP S.Platis about EMIR and their MAP-ERS solution, please email us or enter your contact info here.
ESMA has provided its own Q&A on EMIR trade reporting, click here.