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The European Securities and Markets Authority (ESMA) last week approved the first four trade repositories to operate under the European Market Infrastructure Regulation (EMIR), marking the start of the countdown to mandatory trade reporting, which will now begin for all asset classes in February - despite concerns the foreign exchange market may still not have the necessary infrastructure to meet the requirements.
Foreign exchange market participants have been grappling for some time with the challenges of dual reporting under EMIR, which requires both counterparties to report the trade - unlike in the US, where the trade can be reported by just one side. While the Global Financial Markets Association (GFMA) has been looking at possible solutions, some market participants say new infrastructure may be needed to tackle the problem.
Under EMIR, both parties' identifiers must be matched and a single unique trade identifier (UTI) generated for the trade before it is conveyed to a repository. Transactions conducted through electronic trading platforms will automatically be given a UTI, and similarly, larger dealers may be able to adapt the trade-confirmation process to allow the creation of UTIs. But for bilaterally executed trades between smaller firms, the requirement to share a single UTI could be a stumbling block.