There are now 19 days until the Go Live of EMIR Trade Reporting. And many questions remain, as we saw the other day.

One that many are struggling with is the issue of delegation, which is not as it first appears.

On a simple basis, delegation is the process of getting your counterparty to report the trade on your behalf. Sounds simple enough, although you will need to give the counterparty all of your details such as clearing details, etc.

Life for the reporting counterparty is less simple. They will need to report the trade for you, but some of the repositories make this quite complex. The message formats are different and the details in question will need to be stored with the trade.

A misconception amongst many is that the act of “getting someone else to report for you” is delegation. Often it is not. Delegation only applies when the other entity is a party to the trade.

You can of course ask another entity to report on your behalf, but that is “third party” reporting, not delegation. But having said that you can also perform third party delegation, which is mean the party to the trade who is being delegated to reports the whole thing via a third party.

The way that you report these different types of trade varies across TRs, with it being rather complex in some cases. For example, some require that a separate account be created for third party reports. If the third party is also part of other trades, they will need two accounts, and will need to send appropriate trades to the right place. And the original account will require messages to be sent in delegated mode or not.

Many are finding themselves unwittingly having to implement these paradigms. This is because market participants with several entities tend to only use one for reporting.

If that happens there are in fact three scenarios:

1. The entity doing the reporting trades with an external counterparty – that is a “normal” trade submitted in a vanilla fashion.
2. Another entity in the group trades with an external counterparty. In that case the entity doing the reporting is a third party. And so the trade must be reported thus, via another account if necessary.
3. An “internal” trade between two entities. This has two sub scenarios:
   a. The entity that reports is a party to the trade – in this case it is delegated reporting.
   b. Neither entity is the reporting entity – This is a third party scenario.

And so such a participant will find themselves having to support all 3 scenarios, even though they never felt they were being delegated to or acting as a third party.

There has been a lack of clarity over how this all works, and therefore delegation has become yet another “last minute” issue that needs to be solved within the next 19 days.