The Futures Industry Association (FIA) has published a new position paper that recommends a number of changes to how exchange traded derivatives (ETDs) are reported under European regulation.
The FIA says in the paper that it fully supports the efforts by regulatory authorities to make the derivatives markets more transparent and safe, adding that the reporting requirements established under EMIR do help to further this aim. However, it argues that these reporting requirements were primarily designed to improve transparency in the OTC derivatives markets – which the FIA says it has done – but are not necessarily “fit for purpose for the reporting of ETDs”.
Central to the changes that it advocates in the paper is modifying the legislative text of the EMIR reporting requirements in order to grant EU regulators the authority to remove the obligation to report transaction-level details and allow reporting firms to submit ETD position reports instead.
The FIA argues that position-level reporting regime more accurately reflects the nature of ETDs, which are standardised contracts that are “compressed” into a net position at the end of each day.
“A position-level reporting regime would also provide a more accurate representation of ETD lifecycle events and margin/collateral changes given that these take place at position level and cannot be reported at transaction level,” it says in the position paper.
The association claims that discontinuing transaction-level reporting can be done without loss of regulatory oversight for systemic risk purposes because it is the end-of-day position that is the most relevant and not the individual transactions.
It also says that transactions and positions entered prior to January 2018 should not be subject to back-reporting requirements.
“Trade reporting is extremely important and needed, and it is one of the more significant changes that came out of the G20 Pittsburgh accords for the monitoring of systemic risks,” says FIA president and CEO, Walt Lukken.
In a release issued today, the association comments: “FIA encourages policymakers to acknowledge the recommendations set out within this paper and support the modifications of the EMIR Reporting regime for ETDs, which remains under review, as envisaged in the recently published text of EMIR Refit. FIA stands ready to assist policy makers and legislators as required.”