What Is Underreporting?
When it comes to EMIR, the absence of a trade report isn’t just an oversight — it’s a regulatory failure. Unlike rejections or mismatches, missing trades don’t generate alerts. Without an inbound trade feed to the trade repository, there’s nothing to reject or match against — meaning the absence passes silently.
How It Happens
Underreporting can result from:
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Broken trade capture processes
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Errors in report filtering logic, excluding valid trades
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Missing lifecycle events for previously reported trades (e.g., modifications or terminations not sent)
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Transmission failures between internal systems and the trade repository
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Lapses in delegated reporting oversight
Because these trades never reach the trade repository, there’s no immediate flag to trigger investigation.
Why It’s So Risky
Key risks include:
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Non-compliance with EMIR obligations
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Inaccurate exposure and risk reporting at the systemic level
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Regulatory enforcement or public censure during audits or investigations
Even when reporting is delegated, the legal obligation for completeness remains with the counterparty — making independent oversight essential.
How to Stay in Control
To mitigate this risk, firms should:
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Reconcile internal trade records against reports submitted to the trade repository
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Use acknowledgements and receipt files from trade repositories as verification
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Perform periodic completeness reviews (daily for high-volume products, monthly for lower-volume portfolios, depending on risk appetite)
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Apply rigorous oversight to delegated reporting arrangements
Final Thought
The real danger of underreporting is its silence. Without controls designed to highlight absence, these gaps may go undetected for months — or longer. That’s why strong reporting oversight needs to prioritise completeness as highly as it does accuracy.
