Yesterday ESMA launched a public consultation reviewing trade reporting under EMIR. The document can be found here.

The consultation follows many issues and confusion around EMIR reporting, which has been only partially resolved by the various “questions and answers” documents that have been released over the last year.

The document mainly proposes changes to some of the fields, and also to some of the guidelines around the fields as well as the descriptions. There is also a proposal on mandatory UTIs. Many of these are already in the Q+A and would be transposed into the Regulatory technical standards.

Taking a look at the proposals from an energy and commodities perspective, there are some interesting parts:

• The use of LEIs are going to become more or less mandatory in most cases for party IDs. (page 9)
• Both “Original notional” and “Actual notional” will be reportable. (page 10). This is important for the energy and commodities industry. It does open the question of how often actual notional must be updated. There are further points to consider on page 14.
• New action types will be used making clearer distinctions between types of event(page 11). Error correction is made more efficient and less events will need to be sent for certain activities, such as sending a position.
• Non financial counterparties will now need to be classified(page 12). This would necessitate some enrichment changes in many energy and commodity companies.
• Collateral reporting now applies in both directions. (page 13)

The proposed new field list is laid out with various clarifications in the new descriptions, although not all fields that have puzzled the industry have been covered.

The “Energy” section (page 33) is unchanged, but also states that information can be “reported according to Regulation(EU) No 1227/2011 if applicable“. This is a reference to REMIT and the document seems to imply that one can use the REMIT format here. That format is generally held to be more efficient than the EMIR one, although some more words would be useful around when and how this can be done.

A very interesting part is on page 42 and talks about mandating how UTIs should be generated. This will be welcome in the industry. The text describes a hierarchy of who generates the UTI. An interesting part of the proposal is that for uncleared but confirmed trades, the confirmations platform must generate the UTI. However, since an NFC- has two days in which to confirm under EMIR, and trade reports must be sent in after one day, there would appear to be a timing issue here (although such confirmations do often come sooner than T+2). Note that this is only where “both parties fail to agree” on how to generate the UTI, so the market would the flexibility to use whichever method they wish, without being forced, say by a larger counterparty to adopt their method.

It is not yet clear when these changes will take effect, but they will necessitate yet another round of modifications to reporting systems. In all likelihood they will come in later next year, close to the first REMIT deadline.

We will publish our full response in due course. In the meantime, it is recommended become familiar with the document, and plan in implementation of the changes next year.