EMIR and the Challenges Ahead
What is EMIR?
The European Markets Infrastructure Regulation (EMIR) enforces requirements aimed at improving the transparency of OTC derivatives markets and their associated risks. The regulation has three major requirements:
1. Central clearing of OTC derivatives
2. Risk mitigation techniques for OTC derivatives not cleared by CCP (e.g. valuation, timely confirmation, portfolio reconciliation, dispute resolution, collateral management, and portfolio compression)
3. Transaction reporting of all derivatives (OTC and Listed)
Entities classified as Financial Counterparties (FC) and non-financial counterparties (e.g. UCITS, Occupational Pension Funds, AIFM, and credit institutions) have had to comply with EMIR since 2013.
Market participants should be identified with pre-LEI (Legal Entity Identifier) and every trade reported to Trade Repositories (TRs) requires a Unique Trade Identifier (UTI). Flexibility to accommodate new regulatory requirements from ESMA, like the recent proposal to report 25+ additional fields in addition to the existing 85 current fields, is a necessity.
SS&C GlobeOp leverages its middle- and back-office technologies and has built agility into its operating model to offer the following:
- Daily mark-to-market or mark-to-model of OTC derivative transactions in accordance to the robust valuation policy in adherence to Article 11 (2) of EMIR
- Assistance in documenting a dispute resolution policy
- Daily EMIR position, valuation, and collateral reconciliation for client portfolio and resolution of breaks in adherence to dispute resolution policy
- EMIR transaction reporting and exception resolution to multiple TRs