How to Report Correctly in Zero Net Positions under EMIR? Reminders from CySEC

How to Report Correctly in Zero Net Positions under EMIR?

The Cyprus Securities and Exchange Commission (CySEC) has flagged several incorrect reporting practices of Regulated Entities under EMIR in respect of zero net positions. TRAction explains the practices to avoid and outlines how we ensure your over-the-counter (OTC) derivatives are reported accurately under EMIR in the context of zero net positions.

We explain 3 methods identified by CySEC as misaligned with the regulatory framework under EMIR, and which fail to meet EMIR reporting requirements:

The Incorrect PracticeWhy is it wrong?
Maintaining the position as open without reporting the contract value on a daily basisYou are required to send daily valuations for all outstanding derivatives. See Article 2 of the CIR 1247/2012
Exiting the position without reporting a terminationYou are required to report the termination of a derivative if you want to exit a position. Any failure to report a termination will result in the derivative remaining open in the trade repository (TR) records, where it will not receive daily valuations and other relevant modifications. See Article 9 of EMIR
Termination of the position and reviving (reopening) it later using the original unique transaction identifier (UTI)A UTI cannot be re-used after a position is terminated. If a position is terminated by mistake, it needs to be re-submitted as a new trade with a unique UTI. (Article 4(1)(a) of the CIR 1247/2012)

Please note that a new action type ‘Revive’ will be introduced under EMIR Refit to allow for reopening of a derivative that has been terminated or errored by mistake without regenerating a new UTI but should not be used for regular closing and reopening of positions. This action type has not yet taken effect.

If you are a Regulated Entity, we recommend you confirm with the staff responsible for your reporting (or your reporting delegate) that they are not engaging in any of these reporting methods.

In the specific context of zero net positions, TRAction ensures clients reporting under EMIR meet their reporting requirement by:

  1. Terminating a position and reporting a new one using a different UTI at a later stage and not reporting any valuations between the termination of the first position and the creation of the latter; and
  2. Maintaining an open position and reporting a zero contract value on a daily basis.

As a delegated reporting service provider, we make sure your trades are in the required format prior to submission to the designated TR, so you can avoid non-compliance.

If you would like to discuss your reporting obligations with respect to zero net positions, please contact our team.

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