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"The decision has been taken that the deferral ESMA suggested will not take place. ESMA is now engaged – and, I think, working – on a set of clarifications for the industry, through FAQs, to ensure the guidelines and guidance is out there as soon as possible for industry to start working on its systems", said Pearson. A spokesman for ESMA confirmed Pearson's claim that there had been a meeting of the ESMA board on September 24, but declined to say whether the futures reporting issue had been discussed. The spokesman said the authority is still waiting for a formal decision from the EC and continues to believe a postponement of the start date is needed.
ESMA asked the EC on August 6 for the one-year delay. Its rules currently require both parties to a listed derivative to report to a trade repository, but ESMA said its implementation work had revealed "the complexity of reporting of trades subject to the rules of a trading venue and executed in compliance with those rules, including the processing by the trading venue after execution and the clearing by a CCP within one working day of execution". In this context, ESMA said it was not easy to identify the reporting counterparty because a single trade might involve clients, market-makers, executing brokers and clearing brokers, as well as an exchange and clearing house.
Pearson said regulators had reached a point where they could no longer agree which parties should report. "I think the feeling in ESMA was that they could continue those discussions and not actually progress and advance, and therefore a decision had to be taken – rather than defer another year and a half, where it would be quite probable that no advance was made – that they would take a decision and come up with a straightforward answer about the reporting requirement. It puts the pressure on, and removes the possibility of continuing uncertainty in the market that is there now", he says. The outcome could be that ESMA hands the reporting obligation to a single party, he added. "The way I understand it is that clarity is required and that one party would need to report. It could be a venue, or someone else, but I think the preferred option is that one party should report", Pearson said.
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