The European Market Infrastructure Regulation (EMIR) requires EU-counterparties to all derivative contracts, whether traded on- or off-exchange, to report certain information and details relating to the trade to a registered trade repository (TR). You can find Skadden’s prior alert on EU derivatives reporting here.¹

Beginning February 12, 2014, EU entities must report to a TR any new derivatives contracts entered into on or after that date within one business day. Contrary to market expectation, the European Securities and Markets Authority (ESMA) has indicated that the deferred reporting deadlines do not apply to a derivatives contract entered into between August 16, 2012, and February 11, 2014 (inclusive), that remains outstanding on February 12, 2014. Unless ESMA can be persuaded otherwise, these derivatives contracts (highlighted in red in the table below) must be reported to a TR on or before February 12, 2014.

Trade Repositories

There are six ESMA-registered TRs; however, only five will accept reports for all asset classes.

Delegation and Operational Issues

An EU entity is allowed to delegate reporting to another party, for example its counterparty or a central counterparty. However, a counterparty that is required to report its derivative transaction under EMIR will remain liable for any misreporting by its delegate(s).

Some sell-side firms have expressed an unwillingness to offer a reporting service, while others appear willing to submit report for certain derivatives contracts with buy-side counterparties. For those sell-side firms who agree to report, the scope of indemnification for losses arising from reporting errors can be expected to be a commercial point requiring negotiation. Similar issues arose during the implementation of the Dodd-Frank reporting requirements. With regard to EMIR, a consistent approach has yet to emerge.

EU-US equivalence?

The European Commission (Commission) has not made a determination that would permit EU counterparties to apply Dodd-Frank (instead of EMIR) reporting requirements to trades concluded with U.S. counterparties. Similarly, the U.S. Commodity Futures Trading Commission (CFTC) does not permit substituted compliance with the Dodd-Frank reporting requirements for off-exchange derivatives contracts (i.e., swaps) entered into with U.S. persons. However, both the Commission and CFTC could grant relief for duplicative reporting requirements under EMIR and Dodd-Frank at a future date. You can find Skadden’s analysis of the CFTC’s Cross-Border Guidance here² and the CFTC’s Substituted Compliance Determination for EU derivatives regulatory requirements here.³

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1 See Skadden client alert “EU Derivatives Trade Reporting Obligations to Begin on February 12, 2014” available at http://www.skadden.com/insights/eu-derivatives-trade-reporting-obligations-begin-february-12-2014. See also Skadden Insights article “EMIR Regulations Continue to Impact Derivatives Markets in 2014,” available at http://insights.skadden.com/financial-regulation/emir-regulations-continue-impact-derivatives-markets-2014.

2 See Skadden client alert “CFTC Issues Final Guidance and Accompanying Exemptive Order on Cross-Border Application of Certain Swap Regulations” available at https://www.skadden.com/insights/cftc-issues-final-guidance-and-accompanying-exemptive-order-cross-border-application.

3 See Skadden client alert “CFTC Grants Substituted Swaps Compliance for Six Foreign Jurisdictions” available at http://www.skadden.com/insights/cftc-grants-substituted-swaps-compliance-six-foreign-jurisdictions.

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