Differences between trade level reporting vs position level reporting are important to note as part of transaction reporting – TRAction previously discussed them in this article. Position level reporting basically targets aggregated data to show overall exposure across the counterparties concerned.
Under EMIR, reporting at position level for all derivatives is not permissible and can only be done for 3 types of derivatives:
- Contracts for Difference (CFDs),
- Exchange traded derivatives (ETDs) and
- centrally-cleared OTC derivatives.
Although both the EU and UK regimes are in agreement on position level reporting, there are slight nuances between the approaches taken by the FCA and ESMA and which we discuss below.
EU – EMIR
Under the EMIR Refit Guidelines:
“In general terms, ’position’ should be understood as the exposure between a pair of counterparties, consisting of a set of fungible derivatives (trades) with economic and legal relations among them which allows for a common risk management that results in a net or reduced volume of the joint exposure.”
Each of the below criteria need to be satisfied to report at position level:
- The legal arrangement needs to set the risk at position level.
- All trade reports submitted to the trade repository are in relation to instruments which are fungible with each other.
- The individual trades formerly submitted are replaced by the position report (similar to trades between a central clearing counterparty (CCPs) and a clearing member).
As noted above, the following contract types are eligible for position level reporting under EU EMIR:
- Contracts for Difference (CFDs),
- Exchange traded derivatives (ETDs) and
- centrally-cleared OTC derivatives.
CFDs are strongly recommended for position level reporting to avoid the need to receive daily valuation updates until the trade is either cancelled or indefinitely, if there is no maturity and generally CFDs have no maturity.
Position level reporting also needs to be agreed to by both counterparties to a trade pursuant to Article 9(1e) of EMIR, to ensure that details are reported with accuracy and without duplication. Without agreement, reporting at position level is still a requirement even where the only possible option to comply with the regulations is to report at position level (e.g. individual position components cannot be valued).
UK – EMIR
Article 5 of EMIR Technical Standards on the Minimum Details of the Data to be Reported to Trade Repositories 2023 (RTS) deals with position level reporting which is only permitted when all the below criteria are satisfied:
- Management of risk is at position level.
- The reporting is of derivatives either concluded on a trading venue or platform situated out of the UK or centrally cleared; or CFDs which are mutually interchangeable and where they have been replaced by the position.
- Prior to the inclusion of an Instrument in the position, it was correctly reported at trade level.
- Other events affecting the common fields are reported separately.
- The relevant Instrument was terminated by selecting the correct fields for both action type and event type.
- The resulting position was reported as a new position or update to an existing position.
- The position was correctly reported with the completion of all the applicable fields along with the correct indication that it is for position level reporting.
- Both counterparties are in agreement on the position level reporting aspect for the Instrument.
Future updates, relevant to valuations, collateral and changes to other modifications and lifecycle events, are to be reported at position level and cannot be reported at trade level regarding the original instrument which was terminated and included in the position level reporting.
If you require assistance in determining whether the products you trade fall under eligible products for position level reporting and need assistance in the detail around completion of the fields when reporting your trades, please let us know.
