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Screenshot of a breaking news alert e-mail from Q2 2017
The following guest post is courtesy of Chris Dingley, Head of Sales at regulatory reporting solutions specialist Abide Financial.
Following a reasonable bedding in period, CySEC has recently begun the process of enforcing adherence to standards established under EMIR.
The recent communication regarding EMIR obligations on Cypriot regulated entities is a timely reinforcement of regulator ESMA’s position that investment firms must take responsibility for their own reporting and also reminds firms of mandatory clearing and risk reduction techniques. Given that mandatory clearing is yet to apply to FX and that almost all CFD business is conducted over electronic platforms, the major impact for most firms will be in reporting.
A ‘fire and forget’ model of reporting via a third party (whether your broker or a technology provider) and associated ‘out of sight, out of mind’ approach to reporting falls some way short of what the regulator expects you to do. This is true in respect of maintaining oversight and control of the data you report to the repository and also, in “exercising due diligence” to ensure that the reporting mechanism deployed mitigates operational and counterparty credit risk.
Delegating the process doesn’t alter your obligation to maintain oversight
EMIR requires regulated entities 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 in accordance with Article 55 or recognised in accordance with Article 77.
While the EMIR requirement to report eligible trades to a “registered/recognised” Trade Repository is clear and most firms are reporting today, the regulatory requirement to “ensure” reporting imposes a higher standard of oversight than may be apparent at first.
This involves the responsibility to maintain oversight and control of the information they report, regardless of whether the reporting process has been ‘delegated’ to a third party (broker or vendor).
Abide Financial’s reporting model provides transaction monitoring and management tools that enable clients to show regulators that they are taking a proactive approach to reporting compliance. A GUI enables firms to monitor data at the Trade Repository and to resolve breaks as and when they arise.
Due Diligence – Know Your Reporting Partner
Abide Financial’s exclusive focus is helping firms meet regulatory compliance obligations under EMIR, MiFID and broader and evolving market regulation. In addition to providing specialist advisory services and an established reporting hub, Abide is registered as an Approved Reporting Mechanism (ARM) and is registering as a Trade Repository. In both registration processes, Abide has had to evidence to regulators (FCA and ESMA) the quality of its reporting systems and controls, the rigour of its business model and significant business continuity contingencies.
Becoming a registered Trade Repository is the next step for Abide in the development of assuring a top to bottom reporting offering that does not depend on third-party suppliers. Clients working with Abide benefit from greater security and transparency throughout the reporting cycle, efficient and compliant reporting (and oversight) and a reporting partnership with a solid service provider that ticks the ‘due diligence’ box.