09 January 2014

FT: Traders struggle to meet European reporting deadline

The requirements form part of a Group of 20 commitment to safeguard markets and give regulators a better view of changing counterparty risks. But the brief mandate has led to huge operational challenges for market participants and a squeezed timetable for compliance. Operators of the repositories to which the deals will be reported say many market participants have yet to begin testing their systems.

“It’s very compressed but there’s been a lot of work done even in the last two weeks", said Stewart Macbeth, chief executive of DTCC Derivatives Repository, run by the US-based Depository Trust and Clearing Corporation. “But there are a lot of people coming to us late,” he added.

Each company and all of its subsidiaries need a legal entity identifier, a unique “ID” to identify parties in financial contracts. Adding to the complexity, the European Commission ruled the market would have only three months to comply, waving away a request from European regulators for an extension. About 50,000 LEIs have been registered in Europe so far. Deutsche Börse’s Clearstream, which runs the Regis-TR trade repository with Spain’s Bolsas y Mercados Españoles, said nearly 1,000 customers were testing their systems in preparation.

Some are looking to take advantage of a clause in the rules allowing a third party to report deals on their behalf. One company, Global Markets Exchange Group, also announced it had secured a deal on trade reporting outsourcing with Regis-TR.

GMex, a start-up derivatives exchange, has developed a service to report on behalf of corporate entities and investment managers, without requiring the customer to sign up each underlying entity individually. The group was founded last year to offer hybrid fixed-income trading and Deutsche Börse, Europe’s largest exchanges operator by market value, has taken a minority stake in the company.

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