What needs to be reported under EMIR/UK EMIR for Collateral?
*References to EMIR in this article encompass both EMIR and UK EMIR unless otherwise stated.
For the purpose of EMIR Trade Reports, collateral is broken down into three types:
- Initial Margin – protects counterparties against potential losses which could stem from movements in the market value of the derivatives position
- Variation Margin – protects counterparties against exposures related to the current market value of their OTC derivative contracts
- Excess collateral – should capture only additional collateral that is posted or received separately and independently from the initial and variation margin.
In what way can you report these values?
The EMIR Trade Report breaks these collateral types down into 6 fields:
- Initial Margin Posted
- Initial Margin Received
- Variation Margin Posted
- Variation Margin Received
- Excess Collateral Posted
- Excess Collateral Received
These fields should be reported from the Reporting Counterparty’s point of view.
Help, I need to see an example!
Example 1
Reporting on a Per Position basis
Day 1
I have opened an account (as a small firm with a reporting obligation) with my local CFD broker (the other counterparty) and decide to fund my account with £100.
- I place a ‘Buy’ CFD trade on Vodafone shares, Position ID ‘E02LEIABC’.
- To place my trade, my CFD provider takes £30 from the balance in my account, this is 30% of the Notional Value of the CFD trade. (Initial Margin)
- At the end of the day (Day 1), the market price of my open CFD trade is lower than when I opened it. My position is now making a loss of £10.
- To cover my losses, my CFD provider takes this £10 from my balance. (Variation Margin)
| Self-Reporting | Reporting through TRAction |
|---|---|
| Onboard with ARM/TR | Onboard with TRAction (plus assistance onboarding with DTCC if reporting under MAS) |
| Obtain file specifications from the ARM/TR | Provide a file sample or access to data (for automated data transfer) |
| Review field requirements | Work with the onboarding team to ensure that the data is in the correct format |
| Test connections to ensure you can submit files | Finalise submission procedures |
| Upload files to the ARM/TR in the User Acceptance Testing (UAT) environment | - |
| Review the output file and correct if necessary | Review the output file and contact TRAction to make any corrections |
Day 2
- I open a second CFD position in Vodafone shares, Position ID ‘E02LEIXYZ’ which requires my CFD provider to take £18 from my balance (30% of Notional Amount of £60)
- By the end of day 2:
- the market price rises above my executed price and my first position is now in profit by £10. As a result, my CFD provider increases my balance by £10 in recognition of the increase value of my trade.
- my second position is also in profit by £2, but my provider only transfers to/from my balance if my unrealised P&L for a position is more/less than £5/-£5.
Position 1
 | Steeleye | Bloomberg | Cappitech | |
|---|---|---|---|---|
| Data Extraction and Conversion |  | | |
|
| No Onboarding Fees | | | ||
| Delegated Reporting | | |
||
| Fee Caps (EMIR)* | | |
||
| Submit Data in Your Native Format | | |||
| No ARM or TR Account Needed | | | |
|
| Best Execution Monitoring | | | |
|
| Global Reporting (EMIR, MiFIR, ASIC, MAS, & SFTR) | | |
||
| Direct Platform Integrations (eg. MT4 / oneZero) | |
Position 2
| Service details | Basic | Premium | Assured |
|---|---|---|---|
| Standard CSV template | ✓ | ✓ | ✓ |
| Database /API data extraction | ✓ | ✓ | |
| Field mapping logic | ✓ | ✓ | ✓ |
| Portal access | ✓ | ✓ | ✓ |
| Symbols setup | ✓ | ✓ | ✓ |
| Reportability analysis | ✓ | ✓ | |
| ARM Error correction | ✓ | ✓ | |
| Reconciliation of ARM vs Firm records | Annual | Quarterly | |
| Reconciliation of NCA vs Firm records | Annual | Quarterly | |
| Logic updates when regulations change | ✓ | ✓ | |
| Delegated reporting (per LEI) | £200 | £200 | £100 |
| LEI Management | 1 included | 1 included | |
| Service Level Agreement (3 hour response time, 24/5) | ✓ | ||
| Best Execution Monitor *includes month’s fee and 1000 transactions – see pricing structure | ✓ | ✓ | |
| Monthly Account Fee | £600 | £1000 | £2000 |
| Per message cost | £0.02 | £0.02 | £0.015p |
Example 2
Reporting on a Portfolio basis
Let’s take the same example but let’s see what we should do if we report on a Portfolio basis.
Day 1
| Basic | Premium | Assured | |
|---|---|---|---|
| Standard CSV template | ✓ | ✓ | |
| Database / API data extraction | ✓ | ✓ | |
| Field mapping logic | ✓ | ✓ | ✓ |
| Portal access | ✓ | ✓ | ✓ |
| Product/symbols setup | ✓ | ✓ | ✓ |
| Reportability analysis | ✓ | ✓ | |
| TR Error correction | ✓ | ✓ | |
| Reconciliation of TR vs Firm records | Annual | Quarterly | |
| Accuracy review report | Annual | Quarterly | |
| Logic updates when regulations evolve | ✓ | ✓ | |
| Delegated reporting (per LEI) | £100 | NFC free, £100 per FC | NFC free, £50 per FC |
| LEI Management | 1 included plus 1 per paid delegate | 1 included plus 1 per paid delegate |
|
| CSV to XML conversion (Refit) | ✓ | ✓ | |
| UPI registration and retrieval | ✓ | ✓ | |
| Service Level Agreement (3 hour response time, 24/5) | ✓ | ||
| Best Execution Monitor *includes month fee and 1000 transactions – see pricing structure | ✓ | ✓ | |
| Monthly Account Fee^ | £600 | £1000 | £2000 |
| Per message cost^ | £2000 | £0.01 | £0.01 |
| Message fee Cap* (Pay no more after this many messages) | No | 1,000,000 | 500,000 |
As per the example above, each of the values are independent of each other. If I add together the amounts I have posted, it adds to £100 (the balance I originally transferred to my CFD provider).
Day 2
| Pricing Schedule | Description |
|---|---|
| Standard CSV template | TRAction provides clients with a simple sample template that only needs to contain core trade details (e.g. MiFIR is a 65 field report and TRAction only requires a small amount of key data to build a successful MiFIR report). |
| Database / API data extraction | TRAction can connect directly to your trading platform to automatically extract relevant trade details needed to build a full regulatory report across all relevant reporting regimes. This minimises errors associated with manually downloading and sending files each day. |
| Field mapping logic | As a part of the enrichment and conversion process, we provide field-by-field mapping of your trade data in order to pass all TR validations. |
| Portal access | We provide you with access to our secure portal to upload and download trade files and confirmation files. |
| Product/symbols setup | TRAction will create a customised library of symbols that you trade, which we store internally for any future use. |
| Reportability analysis | TRAction provide a field-by-field detailed analysis of your trade files. We have internal validations and technology that filter which trades/instruments are reportable under the relevant regime. |
| TR Error correction | TRAction will correct any errors on behalf of the client. We don’t provide confirmation files with errors, we use our internal platform to reduce any errors from happening, however, these are minimal due to the onboarding stage. |
| Reconciliation of TR vs Firm records | TRAction specialise in consolidating dissimilar data sets. Our team of experts in financial products, compliance/legal and IT, we aim to simplify the process for our clients. Our services include comparison and tracking of open positions, ensuring compliance between your trades and records. |
| Accuracy review report | TRAction will review the reporting carried out for you and prepare a report to highlight where there are concerns that the information we are receiving to generate your reporting or instructions previously received about the nature of your transactions may be incorrect. |
| Logic updates when regulations evolve | Any regulation updates are looked after as part of the package when you are a TRAction client. EMIR Refit? No problem – we will work to make sure you are ready in time. |
| Delegated reporting (per LEI) | TRAction provides delegated reporting where you have offered to complete the reporting on behalf of your clients. We can also provide a separate access to our secure portal for your delegated clients (and appropriately filtered reports) so they can see what you have reported on their behalf. |
| LEI Management | TRAction will maintain the LEI for your firm. We can also assist your delegated clients to maintain their LEI if they would like us to, helping to minimise reporting errors associated with expired LEIs. |
| CSV to XML conversion (Refit) | As part of EMIR Refit, when you become a TRAction client we will provide enrichment and conversion on your CSV files. Saving internal cost on your trade capture systems along with no needing staff who can read or produce XML. |
| UPI registration and retrieval | The Unique Product Identifier (UPI) is a new field and a component of the common data elements (CDE) which will apply for EMIR Refit, UK EMIR Refit, ASIC and MAS rewrite. As part of our connection into ANNA DSB, TRAction will ensure UPIs are reported consistently and accurately. |
| Service Level Agreement (3 hour response time, 24/5) | TRAction are available to provide support 24 hours a day, 5 days a week (Monday to Friday) and will provide a response to support requests within 3 hours of receiving them. |
| Best Execution Monitor *includes month fee and 1000 transactions – see pricing structure | TRAction has developed a Best Execution Monitor to help our clients monitor their compliance with this requirement. Our Best Execution Monitor is an award-winning smart system which collects, analyses and compares your transaction data against market data to identify where the execution received by clients is outside of your execution parameters. |
As per the example above, each of the values are still independent of each other. If I add together the amount, I have posted it adds to £100 (my balance I originally transferred to my CFD provider) plus I have the £10 I received separately for my position being in profit.
There are many different interpretations of the collateral fields. However, one thing ESMA does clarify in the EMIR Q&A is that if amounts are NOT transferred, then they shouldn’t be reported as ‘Posted’. Depending on how a Reporting Counterparty defines ‘transferred’, the fields could be interpreted in a variety of ways, which leads to interpretation differences that TRAction will work with you to help clarify.
What is Collateralisation?
Collateralisation is another reportable field in EMIR and helps to explain the collateral agreement between the two counterparties.
The definitions from Article 3b are as follows:
1. Where no collateral agreement exists between the counterparties or where the collateral agreement between the counterparties stipulates that the reporting counterparty does not post neither initial margin nor variation margin with respect to the derivative contract, the type of collateralisation of the derivative contract shall be identified as uncollateralised;
2. Where the collateral agreement between the counterparties stipulates that the reporting counterparty only posts regularly variation margins with respect to the derivative contract, the type of collateralisation of the derivative contract shall be identified as partially collateralised;
3. Where the collateral agreement between the counterparties stipulates that the reporting counterparty posts the initial margin and regularly posts variation margins and that the other counterparty either posts only variation margins or does not post any margins with respect to the derivative contract, the type of collateralisation of the derivative contract shall be identified as one-way collateralised;
4. Where the collateral agreement between the counterparties stipulates that both counterparties post initial margin and regularly post variation margins with respect to the derivative contract, the type of collateralisation of the derivative contract shall be identified as fully collateralised;
For the example given above, I would report the Collateralisation from my point of view (as the Reporting Counterparty) as ‘One-Way Collateralised’ as I’m posting Initial and Variation Margin and the CFD provider only posts Variation Margin.
For the examples given, the CFD provider (as the Reporting Counterparty) would report our relationship as ‘Partially Collateralised’ as the CFD Provider only regularly posts Variation Margins.
How can TRAction help?
TRAction is happy to provide consultation to clients in order to ensure collateral fields are interpreted and populated correctly.
If you are an MT4/MT5 client that TRAction directly connects to, values can be extracted on a Collateral Portfolio basis, directly from your MetaTrader tables as follows:
- MT4: MT4_Users table; and
- MT5: MT5_Accounts table.
If you would like to report on a per position basis, we need to know how you calculate any Initial Margin and Variation Margin, and whether it is Posted or Received. We can replicate this calculation on our side.
If you are a client that sends files to us, then we have a standard Collateral Portfolio template you can populate and send to us on a daily basis, alongside your regular files.
Please get in contact with us if you have any questions or would like to know more about TRAction’s EMIR reporting services.
