Whose responsibility is it to ensure EMIR hedge trades are reported?

The worldwide Coronavirus lockdown has given many of us extra time to attend to overdue tasks.  

TRAction suggests investment firms use this opportunity to improve their EMIR trade reporting.

We often have new clients asking us to backload their hedge trades as they assumed their liquidity providers (LPs) had reported that for them. It’s important for you to ensure your hedge trades are reported properly. Failure to report your hedge trades can attract serious financial penalties from your National Competent Authority (NCA).

1. Whose responsibility is it to ensure hedge trades are reported?

We’ve included diagrams below to explain the hedge trade requirements under EMIR.

The responsibility rests with the corporate counterparty in the European Economic Area (EEA). However, when a Non-Financial Counterparty minus (NFC-) trades with a Financial Counterparty (FC), the responsibility lies with the FC.

Hedge trade requirements under EMIR

When you hedge your client(s)’ trade(s) with your LP, how many reports do you need to submit?

  1. Client side; and
  2. LP side.

When you delegate the reporting of the LP side of transaction, the LP will report for both parties. However, you must not forget to report the client side transaction as the LP will not report this side of the transaction for you.

2. What do you need to do next?

Get in touch with your liquidity provider and discuss their EMIR reporting processes in relation to the trades you enter into with them.

What to do if your hedge trades are being reporting by your LP on your behalf?

Even if the LP is just an intra-group firm, you will still need to report the trade between you and the intragroup LP.

TRAction works closely with common aggregators and LPs and has experience in processing the files in these common formats.

Please don’t hesitate to get in touch with TRAction to discuss your specific scenarios.

Russell Nethercot

Russell works in our London office. At TRAction, he provides operational support to the processing team alongside working on developing new relationships and improving the experience for existing clients. Russell has 15 years’ experience in the exchange-traded and over-the-counter derivatives markets, and has worked for some of the biggest investment organisations in London. He has a strong client-facing outlook and works to ensure the day-to day running of client transaction reporting is smooth.