10th May 2024: Maples Group Enhances EMIR Reconciliations with Fund Recs – Go to Press Release


EMIR Recs & Reporting - European Markets Infrastructure Regulation

By Ciaran Walshe
EMIR Recs & Reporting - European Markets Infrastructure Regulation

On January 31st The European Securities and Markets Authority (ESMA) published a statement addressing the EMIR Refit implementation issues. Following this, the Central Bank have confirmed that it will exercise its supervisory powers in an appropriate manner. See both below;

ESMA Statement

On 31 January 2019 ESMA published a statement addressing EMIR Refit implementation issues. The ESMA Statement addresses issues around the clearing and trading obligations for small financial counterparties and the backloading requirement for reporting entities, ahead of upcoming deadlines, which would represent challenges for such entities in the context of the ongoing EMIR Refit negotiations. The ESMA Statement acknowledges the challenges that certain small financial counterparties would face to prepare for the 21 June 2019 deadline to start CCP clearing and trading on trading venues some of their OTC derivative contracts, as well as challenges that reporting counterparties would face regarding the backloading requirement by 12 February 2019. The requirements for reporting entities to report derivatives that were outstanding on or after 16 August 2012 and terminated before the EMIR reporting start date, 12 February 2014 is the process commonly referred to as “backloading”. ESMA had previously recommended that the backloading requirement should be waived due to its concern about the particularly high number of reconciliation failures concerning the derivatives subject to backloading and therefore the limited usefulness of such data. The Refit negotiations have not been finalised (therefore create timing gaps for affected entities) but include proposals to remove the backloading requirement from Article 9 of EMIR and to create a small financial counterparties category (whose derivative positions are below certain clearing thresholds) and to exempt the new category of counterparties from the clearing obligation.


Central Bank Statement

The Central Bank’s statement welcomes the ESMA Statement on EMIR Refit implementation regarding the clearing and trading obligations for small financial counterparties and the backloading requirement with respect to the reporting obligation.

The Central Bank’s statement confirms that, in accordance with the recommendation from ESMA and pending the entry into force of EMIR Refit, the Central Bank will apply its risk-based supervisory powers in the day-to-day enforcement of applicable legislation (i.e. EMIR’s reporting obligation, clearing obligation and MiFIR’s trading obligation) in a proportionate manner.


When entering into derivative transactions, firms should be aware of their requirements under EMIR. EMIR was introduced to increase transparency around derivative trading by requiring all trades being reported to Trade Repositories, clearing OTC derivatives and setting requirements for both central counterparties.

Who is subject to the portfolio resolution and dispute resolution obligations and how frequently are they required to reconcile depends on;

  1. Counterparty Location
  2. Counterparty Classification

If greater than 500 trades daily, to be Rec’d daily; Between 51 & 499 trades daily, to be rec’d weekly and if 50 or less trade daily, to be rec’d quarterly. All OTC Derivative Contracts whether they are collateralised or uncollateralised need to be reconciled.

There are no industry standards that provide guidelines for what constitutes a material difference or discrepancy. Not all discrepancies will give rise to a written dispute notice being delivered in accordance with the terms of the Protocol. There is also no material threshold specified under EMIR for this purpose. Thresholds will be set internally based on firms’ own business risk tolerances and may shift over time. Each firm’s approach to determining what will constitute a dispute requiring a dispute notice to be delivered under the Protocol will be documented in their internal policies - the required follow up in the Protocol is for appropriate internal management escalation to take place and for both parties to agree on how to resolve the difference. There is an obligation imposed on financial and non-financial counterparties to an OTC derivative contract to agree in writing or other equivalent electronic means with each of counterparties on the arrangements under which portfolios will be reconciled.

With all of this in mind, completing timely and accurate trade and position reconciliations is imperative to firms so that all Central Bank & ESMA requirements are met.

Management firms with sub advisors or delegated models have the ultimate responsibility that all trades are being reported to the repository and that the information being reported is accurate. Although this can be outsourced the responsibility cannot be outsourced. The Central Bank have confirmed that delegated reporting is one of 4 areas they will be focusing on. They have stated that if reporting obligations are delegated firms should still reconcile all data to ensure all relevant trades have been reported, remedial action is taken to resolve any issues and that they regularly review trade repository rejection reports.

The other areas they will be focusing on include 1. Completeness and accuracy of Trade Reporting, 2. Legal Entity Identifier (LEI) & 3. Unique Trade Identifier (UTI).

Using the Fund Recs Velocity platform, performing these recs and completing this reporting is an automated process where exceptions are highlighted instantly so action can be taken to resolve such issues. Users can configure all tolerance levels to ensure the exceptions being highlighted are relevant.

To discuss the Fund Recs EMIR offering or if you would like a demo, please contact ciaran@fundrecs.com.

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