United States: Ready, Steady, Report! Entry Into Force Of Reporting Obligation Under EMIR On February 12

You are a company that occasionally or on a regular basis enters into swaps. Perhaps you have received from your banks letters notifying the reporting obligation under the European Market Infrastructure Regulation ("EMIR")1and proposing the service of delegation of the reporting on your behalf. You may be wondering what you really need to know and to do to be ready for the reporting.

Yes, the reporting obligation under EMIR will become effective, as of February 12, with respect to all your derivatives contracts irrespective of whether these contracts are traded on or off exchange.

The reporting obligation applies not only to future trades but also extends to include what can be described as "historical transactions." These historical derivatives transactions are:

  • all those derivatives contracts that were outstanding on August 16, 2012 and are still outstanding on February 12, 2014 that will need to be reported within 90 days of the reporting obligation entering into force2; and
  • all those derivatives contracts that were entered into (i) on or after August 16, 2012 or (ii) before August 16, 2012 and were still outstanding on August 16, 2012 but are no longer outstanding that will need to be reported within three years of the reporting obligation entering into force.3

The reporting obligation will apply to all financial and non-financial counterparties as defined in Article 2(8) and 2(9) of EMIR—hence branches of third country entities operating in the EU may not be subject to the reporting requirement themselves although their EU counterparties will be. On the other hand, third country branches of EU entities may be subject to the reporting obligation. Counterparties will therefore need to assess:

  • whether the derivative in question is a financial instrument within points 4-10 of Annex C to MiFID4; and
  • if so, whether their counterparty is organized under the laws of a member state such that it will be subject to the reporting obligation.

It should be noted that a subsidiary or affiliated entity in the EU will be considered as an establishment in the EU. Accordingly, where an EU subsidiary of a third country entity is a counterparty to a derivatives contract, the reporting obligation will apply on both counterparties. The EU subsidiary can, however, ask its counterparty to report both sides of the trade, but the regulatory responsibility to ensure that its side of the trade is correctly reported will be on the EU subsidiary (see below on "Delegation of Reporting").

The reporting obligation will apply whenever negotiations of a derivatives contract are concluded or the contract is modified or terminated (each, a "Reporting Event"). With the exception of historical transactions, all reports must be made to a trade repository no later than one working day after the Reporting Event.

Counterparties should note, however, that the reporting start date is extended by 180 days for the reporting of information relating to collateral and mark-to-market valuation of the contracts (fields 17 to 26 of Table 1 of Commission Delegated Regulation (EU) No 148/2013).

Legal Entity Identifier

You will have to obtain a unique legal entity identifier ("LEI") in order to identify yourself for the purposes of the reporting to a trade repository.

In practice, each legal entity shall obtain a pre-LEI/LEI issued by the Local Operating Unit endorsed in the jurisdiction where it is registered.5This LEI will cover branches and desks of the entity so that the same legal entity will have only one LEI. Individuals are not subject to the reporting obligation, but banks may use clients' codes to identify their counterparties that are individuals.

Information to Report

The information that is required to be reported under EMIR is extensive. The format of the reports to be submitted to trade repositories is set forth in Commission Implementing Regulation (EU) No 1247/2012, and the minimum details that are to be reported are contained in Commission Delegated Regulation (EU) No 148/2013 (together, the "Reporting Standards"). The Reporting Standards set out an extremely detailed set of criteria as to what needs to be reported in accordance with EMIR (59 fields). A very limited list of the information that needs to be reported includes: name of the counterparty; corporate sector of the counterparty; whether the counterparty is a financial counterparty, NFC+, or NFC-; identification of the underlying; deliverable currency; price multiplier; delivery type (e.g., cash or physical); and maturity date.

Non-financial counterparties that do not exceed one of the clearing thresholds (NFC-) are not required to report collateral, mark-to-market, or mark-to-model valuations of derivatives contracts (fields 17 to 26 of Table 1 of Commission Delegated Regulation (EU) No 148/2013). 6

Delegation of Reporting

A counterparty may delegate the reporting to a third party service provider or to the other counterparty. However, even if a counterparty delegates the reporting to its counterparties or a third party, it will remain liable for breach of its reporting obligation and, as such, will still have to monitor that reports are correctly made. In accordance with Article 1(3) of Commission Delegated Regulation (EU) No 148/2013, where a counterparty (or a third party) makes a report on behalf of both counterparties, this must be clearly identified in the report.


1. Parliament and Council Regulation 648/2012 of July 4, 2012 on OTC derivatives, central counterparties, and trade repositories [2012] OJ L201/1.

2. Commission Implementing Regulation 1247/2012, Article 5(3).

3. Ibid Article 5(4).

4. Directive 2004/39/EC of the European Parliament and of the Council of April 21, 2004 on markets in financial instruments.

5. The list of the endorsed Local Operating Units of the Global Entity Identifier System is available at : http://www.leiroc.org/publications/gls/lou_20130318.pdf.

6. Commission Delegated Regulation 148/2013, Article 3(4).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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John C. Ahern
Qian Hu
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