Research Report – 2013/002a
Updated 16th
September 2013
European Commodity Market Regulations
Implementation, Impacts and Solutions Part 1 of 2
Sponsored by
European Energy Market Regulations
© Commodity Technology Advisory LLC and ETR Advisory Ltd, 2013, All Rights Reserved. 2
Contents Introduction .................................................................................................................................................... 5
Big Compliance comes to Energy Trading ....................................................................................................... 6
Background ..................................................................................................................................................... 7
The Banking crisis of 2007/2008 ................................................................................................................. 7
MiFID II ........................................................................................................................................................ 7
Basle III/CRD IV ........................................................................................................................................... 8
The EU “Third Package” and REMIT ............................................................................................................ 8
Key Themes ..................................................................................................................................................... 8
EMIR Rules Overview ....................................................................................................................................10
Different types of party under EMIR ........................................................................................................10
REMIT Rules Overview ..................................................................................................................................11
Timings ..........................................................................................................................................................12
The EMIR Threshold for Non-Financial Counterparties ................................................................................13
Threshold calculation................................................................................................................................13
Trade Reporting ............................................................................................................................................15
Trade Reporting for EMIR .........................................................................................................................15
What must be reported? ......................................................................................................................15
Where data should be reported? .........................................................................................................15
Which data must be reported? ............................................................................................................15
When should data be reported? ..........................................................................................................16
Backloading ..........................................................................................................................................16
Trade Reporting for REMIT .......................................................................................................................16
Which data must be reported? ............................................................................................................16
Where should data be reported to? .....................................................................................................17
What data types must be reported? ....................................................................................................17
Non Standard Trades ............................................................................................................................19
Data Destinations .....................................................................................................................................19
Implementing a trade reporting solution .................................................................................................20
Solution types .......................................................................................................................................20
Required Solution Activities......................................................................................................................21
Data sourcing and gap analysis ............................................................................................................21
Data mapping and capture ...................................................................................................................21
Configuration choice and connection mechanism ...............................................................................21
Data enrichment ...................................................................................................................................21
European Energy Market Regulations
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Pre trade data .......................................................................................................................................21
Issues being encountered .........................................................................................................................22
LEIs (Legal Entity Identifiers) ................................................................................................................22
The UTI (Unique Trade Identifier).........................................................................................................22
Which rules apply to a trade?...............................................................................................................22
Changing requirements ........................................................................................................................23
Risk Management .........................................................................................................................................24
Timely confirmation ..................................................................................................................................25
Portfolio Reconciliation and Dispute Resolution ......................................................................................25
The reconciliation process ........................................................................................................................25
Typical modes of operation ..................................................................................................................25
Bilateral reconciliation ..........................................................................................................................26
Outsourced Reconciliation ...................................................................... Error! Bookmark not defined.
Contractual Changes required for Portfolio Reconciliation and dispute resolution ............................26
Portfolio Compression ..........................................................................................................................27
Bilateral Compression ...........................................................................................................................27
Multilateral Compression .....................................................................................................................27
Is it worth compressing if it is not mandatory? ....................................................................................28
Daily mark to market/model ................................................................................................................28
European Regulatory Solutions Directory ....................................................................................................29
Types of service and software ..................................................................................................................29
Trade Repositories ................................................................................................................................29
Reporting Services ................................................................................................................................34
NASDAQ OMV .......................................................................................................................................34
Specialist Reporting and aggregation software ....................................................................................36
The solution includes; ...........................................................................................................................38
E/CTRM offerings ..................................................................................................................................42
Portfolio Reconciliation/Dispute Resolution ........................................................................................45
Portfolio Compression ..........................................................................................................................46
TriOptima triReduce .............................................................................................................................46
Trade Surveillance ................................................................................................................................47
About The Authors ........................................................................................................................................50
Aviv Handler..............................................................................................................................................50
Dr. Gary M. Vasey .....................................................................................................................................50
ComTech Advisory ....................................................................................................................................51
ETR Advisory .............................................................................................................................................51
European Energy Market Regulations
© Commodity Technology Advisory LLC and ETR Advisory Ltd, 2013, All Rights Reserved. 4
About the Sponsor ........................................................................................................................................52
TriOptima ..................................................................................................................................................52
European Energy Market Regulations
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Introduction Increased regulation and oversight of European energy and commodity trading has commenced as
various aspects of the EMIR (European Market Infrastructure Regulation), REMIT (Regulation on
wholesale Energy Market Integrity and Transparency), and other regulations start to bite. These
regulations are already having an impact on trading and risk management business practices and
may have far reaching and as yet, even un-thought of consequences for the industry. Unfortunately,
the authorities have yet to define some of the detail and clarity needed to be able to determine this.
This research, conducted jointly by industry leading analysts and experts, Commodity Technology
Advisory and ETR Advisory, aims to help to clarify the issues and to examine the impact of regulation
on software requirements in the trading and risk management business function. It looks at the
current implementation schedule of the regulations and examines some of the implementation
impacts of the yet to be defined details of the regulations. It also reviews the software, services and
platforms available in the market to support aspects of the European regulatory environment and
establish the readiness of European traders for operating under the regulations.
The research is focused on understanding:
• Implementation time frames and what this means to traders
• The unknowns and yet to be defined details and their implications
• A review of solutions, services and platforms in the market designed to support these
regulations
• Readiness of trading organizations from a business process, technology and holistic
standpoint – This will be a separate report issued as Part 2B
Upon completion of data gathering and interviews, we will draft a follow up report including detailed
survey results and analysts conclusions. That report will also be available for download to industry
professionals via our various websites.
Less than a week after releasing this report on 13th September 2013 there were already several
changes in dates and rules. The report is therefore updated as of 16th
September 2013
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Big Compliance comes to Energy Trading The energy and broader commodity-trading world is in the process of its latest stage in its maturity:
That of “Big Compliance”.
The rules that most energy traders will have to implement not only require a great deal of IT work,
but also some process re-engineering and an acceptance of the fact that compliance will occupy a
significantly larger component of overall activities and budgets on an on-going basis. One can argue
as to whether this is appropriate for an industry that many feel is “non-systemic”, but as things stand
most of these changes will happen with the result that industry business processes, practices, the IT
landscape and possibly even the players, will change.
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Background The upcoming rule sets stem initially from two sources:
1) Reactions to the Banking crisis of 2007/2008
2) The EU “3rd Package” - which further aims to create a single European gas and power
market.
The Banking crisis of 2007/2008 Following the crisis, several initiatives kicked off in order to attempt prevention of a repeat. Key
amongst these was the declaration that arose out of the 2009 G20 Pittsburgh Summit, which stated:
“All standardized OTC derivative contracts should be traded on exchanges or electronic
trading platforms, where appropriate, and cleared through central counterparties by end‐
2012 at the latest. OTC derivative contracts should be reported to trade repositories. Non‐
centrally cleared contracts should be subject to higher capital requirements.”
In essence, the objective of this declaration was a reduction in the “systemic risk” that brought the
crisis about.
Each G20 country undertook to conform to the declaration, and this has resulted in several
initiatives including Dodd Frank in the US, and EMIR (European Marketing Infrastructure Regulation)
in the EU. Other G20 countries are also in the process of implementing their versions.
Amongst the principles encompassed in the declaration, were:
- Transparency
- Move to standardized exchanges
- Risk reduction
These have led to a variety of pillars including reporting of trades to repositories, a move to OTC
Clearing, several risk reduction techniques and the desired imposition of mandatory position limits
on commodities.
MiFID II In addition to EMIR, other initiatives were created in order to address the issues. In Europe, this
includes MiFID II. The Markets in Financial Instruments Directive (MiFID) came into force in 2007 and
introduced several new concepts for financial companies, such as “passporting” i.e. the requirement
to be able to execute equally in any European location, and a requirement to provide best execution.
It introduced the concept of a Multilateral Trading Facility (MTF) to which certain transparency and
operation rules apply.
However, the majority of commodity traders received an exemption from these rules.
MiFID II extends the original initiative in many ways, including a wider ranging Organized Trading
Facility (OTF). Of particular interest to our market are two items:
1) The potential removal of the commodity trader exemption , in many cases,
2) Mandatory Position Limits (which in the US are being implemented within Dodd Frank).
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Basle III/CRD IV The Basle III accords modify the Basle II accords targeted at the banking industry. These outline how
banks should calculate their capital requirements, for credit, market and operational risk, amongst
other things. Basle III moves to a more prudent capital calculation methodology and capital ratios for
banks. This includes the use of Credit Value Adjustment (CVA) and similar measures. In Europe, the
rules are being implemented as the fourth Capital Requirements Directive (CRD).
Some of the new capital calculation rules could well apply to energy traders, although probably not
until 2017. However, these are yet another set of rules that should be on Energy Traders’ radars.
The EU “Third Package” and REMIT The European Union third package was adopted in 2009. It aimed to further open up Europe’s gas
and power markets using several means including unbundling previously vertically integrated gas
and power companies, the move to standardize TSOs, and the creation of a single market.
As part of this framework, the Regulation of Wholesale Markets Transparency and Integrity (REMIT)
aims to increase transparency within the market, by the prohibition of insider trading, and aims to
further limit market abuse.
The prohibition of market abuse involves not only avoiding attempted and actual market
manipulation, but also reporting trade and “fundamental” data to the authorities.
REMIT applies to all wholesale physical Gas, Power, LNG and Emission trading in Europe as well as to
connected derivatives.
Key Themes There are four key “themes” identifiable across all of these new initiatives and these are explored in
the body of this report:
- Trade and Position Reporting – reporting of trades under EMIR and REMIT and also position
reporting under MiFID II
- Clearing - OTC Clearing as mandated under EMIR
- Risk Management – Rules such as Portfolio reconciliation and compression under EMIR as
well as CRD IV rules
- Trade Monitoring and Surveillance – Under REMIT as well as MAD II
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The table above summarizes the regulations and the four key themes.
Although linked, each stream requires a different set of process and IT changes. We will be
addressing them separately, with this particular report focused on trade reporting and risk
management.
Reporting Clearing Risk Management Trade
Monitoring
EMIR To Trade
Repositories
To applicable OTC
derivatives for FC
and NFC+
Timely Confirmation
Portfolio,
Reconciliation,
Dispute Resolution,
Portfolio
Compression,
Daily mark to
market (FC, NFC+)
REMIT Power and gas
physical and
financial to RRMs
Fundamental data
to RISs
None
manipulation
rules apply to
physical and
financial gas
and power
MiFID II Real time position
reporting and
limits
various
MAD II Extends MAD
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EMIR Rules Overview As outlined above, EMIR is based on the declaration at the G20 Summit in Pittsburgh in 2009. It
entered into force on 16 August 2012. The European Securities Market Authority (ESMA)
implements EMIR, and the local National Compliance Authorities (NCAs), such as the UK FCA,
enforce it. The Regulatory Technical Standards to implement many of the rules were proposed in
December 2012 and subsequently approved by the European parliament in February 2013.
EMIR has four key themes:
Trade Reporting – This requires all derivatives (OTC and Exchange Traded) to be reported to
third party “Trade Repositories” (TR). Both sides of the deal must report the trade using the
same identifier, within T+1. At the time of writing, this requirement is to commence on 12th
February 2013 for all OTC derivatives.
Clearing of OTC Derivatives – It is desired that as many OTC derivatives as possible are
cleared via CCPs. This will generally apply to more standardized derivatives. There will also
be new rules about the margin requirements of uncleared derivatives but these are not yet
finalized.
Risk Mitigation – Five sets of rules designed to mitigate risk: Timely Confirmations, Portfolio
Reconciliation, Dispute Resolution, Portfolio Compression, and Daily Mark to Market/Model.
These rules are explained in more detail in the section below.
CCPs (Central Clearing Counterparties) – Rules about the running and funding of CCPs that
are not relevant to the Energy Trading business.
Different types of party under EMIR EMIR defines four types of party:
1) Financial Counterparties (FC) such as banks and other financial institutions
2) Non-Financial Counterparties (NFC) – all other EU-based entities. These are divided into:
a. Over the “threshold” (NFC+) - those who trade over a certain amount per year
b. Under the “threshold” (NFC-)
3) Third country – those outside the EU
NFCs must determine their status by using a different threshold number for each asset class as
follows:
• Credit - €1bn
• Equity - €1bn
• Interest Rates - €3bn
• FX - €3bn
• Commodities €3bn
The numbers above refer to annual gross notional numbers. Only “unhedged” trades are to be
included in this number. Only one of these numbers must be breached in order for the trading entity
to be considered “over the threshold”.
It has been obligatory to report being over the threshold since 15th
March 2013. All market
participants are obligated to be calculating their totals on a daily basis, using a 30-day average.
Those under the threshold have a more lenient interpretation of the rules, as will be outlined below.
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REMIT Rules Overview The objective of REMIT is to promote market integrity and transparency in the European gas and
power markets, and it entered into force in December 2011. The EU-level Agency for the
Cooperation of Energy Regulators (ACER) are responsible for implementing the rules with local
National Regulatory Authorities (NRAs) enforcing them by implementing national laws. It applies to
all physical wholesale gas, power, LNG and emission trading in Europe, and derivatives based on
them. REMIT is an EU level “Regulation”, which each country must implement. ACER publishes
“guidance” on how it thinks the rules should be implemented but these are non-binding.
REMIT has two pillars:
Inside Information – From December 2011 it was prohibited to trade using inside information. The
information in scope relates to physical information that could be used to the receiving party's
advantage, such as knowledge of an unplanned outage. If in possession of such information, market
participants may only trade under very limited circumstances. The approach to compliance so far has
been to publish the information as soon as possible usually on a company website (known as the
“REMIT Page”). The information can also be published to transparency platforms managed by
certain parties, such as the National Grid in the UK.
Prohibition of Market Manipulation ‐ Once REMIT is “implemented” by the European parliament, it
will be prohibited to attempt to or actually manipulate the markets. The ACER guidance contains
many details of what comprises market manipulation, divided into: a) false or misleading
transactions, b) price positioning c) transactions involving deception and, d) dissemination of
misleading information.
In addition to prohibiting this activity, REMIT requires that all trade and fundamental data be
reported to ACER 6 months after the rules come in. This gives rise to the second trade-reporting
requirement, which is outlined in the section below.
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Timings This diagram summarizes the various timings of EMIR and REMIT:-
15th March 2013 Daily Threshold Calculation
Confirms T+7/5
15th Sept 2013 Portfolio Reconciliation
Dispute Resolution
Compression
Q4 REMIT "Implemented"
12th February 2014 EMIR OTC Derivative Trade Reporting
12th
May 2014
EMIR Backloading (Trades after 16th August
2012)
Q3 OTC Clearing for FCs
15th September
2014 Remaining EMIR Risk Management
1st January 2015 EMIR ETD Reporting
The timetable above shows a summary of the dates as at the time of writing. However, it is worth
noting that many of these dates, particularly for trade reporting, have slipped and some could slip
again.
For example, originally, EMIR trade reporting was planned to go live in two batches:
1) Interest rate Swaps and Credit Default Swaps – July 2013
2) All other derivatives – January 2014
Over the course of the first half of 2013, the first date slipped, so that it became the same as the
second date, i.e. 1st January 2014. However, since the dates “merged” the date for exchange-traded
derivatives has moved out by a year to 1st January 2015
Less than a week after publishing the original report both OTC dates were moved out from 1st
January to 12th February 2014. It will be interesting to see if these dates split again or are moved
again. However it is prudent to assume that the go live will be as planned. In order for the dates to
hold, Trade Repositories must be “Approved” by ESMA by the 7th
November 2013.
Similarly, the REMIT dates have slipped. Originally, the rules were to have been “implemented” by
the European parliament by 29th June 2013. However this has not occurred. It is expected that they
will be implemented by year-end.
Reporting is to start 6 months after implementation. However, this would require that the
infrastructure is ready. We recommend that participants keep a close eye on developments.
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The EMIR Threshold for Non-Financial Counterparties Non-financial counterparties that are over the threshold must bear more onerous requirements than
those that are under, as summarized in this chart:
NFC- NFC+-
Trade Reporting All trades to be reported All trades to be reported
including daily market to mark
information and collateral
information
Clearing OTC Clearing not mandatory OTC Clearing Mandatory
Timely Trade Confirmations Currently must confirm within
T+7 going to down T+2 in
August 2014
Currently must confirm within
T+5 going to down T+1 in
August 2014
Portfolio Reconciliation Must reconcile either quarterly
or annually depending on size
of portfolio
Must reconcile daily, weekly or
quarterly depending on size of
portfolio
Portfolio Compression Must compress trades for
portfolios with over 500 trades
Must compress trades for
portfolios with over 500 trades
Daily Mark to market Not required Must mark to market or model
daily.
The requirement to clear, when it comes in, could require a great deal of extra capital from the
market participants, Therefore, many market participants consider it to be desirable to be under the
threshold.
Threshold calculation Since 15th March 2013, it has been obligatory for NFCs to calculate their threshold values on a daily
basis using a 30-day average, and to report to the NCA if over.
In order to be considered to be over the threshold, a market participant needs to be over one of the
following:
• Credit - €1bn
• Equity - €1bn
• Interest Rates - €3bn
• FX - €3bn
• Commodities €3bn
The gross notional value of the balance of each number is taken. There are however, some
important considerations:
Group level calculation – The value to be used is the total for all entities in the group, no
matter where they are. Therefore, a small subsidiary of a large non-EU group could find
itself over the threshold. The participant must calculate each number for each group
member and sum those on a gross basis to see if they are over. If the group company is in a
third country which is a “recognised regime”, that total may not need to be included.
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Hedges – Hedged trades do not contribute to the threshold. Hedges under EMIR are defined
as a trade being one of the following:
a) The trade is already defined as a hedge under hedge accounting rules (e.g. IAS 39)
b) It is designed to objectively “reduce risk” of assets, services, inputs, products,
commodities or liabilities that the NFC owns
c) It is designed to reduce the risk of a hedge instrument as defined above
It is important to record the hedge status of each trade to determine if it is a hedge or not.
NCAs are already auditing NFCs that are not over the threshold and so it is important to
record the hedge reason.
What is a derivative? – When calculating the threshold it is important to consider which
trades are considered “derivatives” under EMIR. This definition is not simple but is generally
defined as a trade that is settled for cash, but also as a trade that is transacted via a
multilateral trading facility (MTF), which is particularly important for physical forwards which
could otherwise not be considered thus. This was confirmed by the FCA on 12th
September
2013.
Different execution venues, platforms and brokers may or may not be MTFs, and there is a
current trend for certain platforms to delist themselves from the MTF list. Since the list will
be dynamic, any solution to calculate threshold values will need to be able to cope with such
changes. The FCA have announced their intention to say which platforms are to be
considered MTFs on 16th
December 2013.
If an intra-group trade is not a hedge (although it often will be), then both sides of the trade
count towards the threshold i.e. double the notional.
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Trade Reporting EMIR and REMIT each have trade reporting requirements: EMIR for OTC and Exchange Traded
Derivatives, and REMIT for physical wholesale gas power, LNG and emissions trades as well as their
derivatives.
At the time of writing, EMIR OTC trade reporting is due in February 2014, with REMIT due in July
2014.
REMIT specifically has a goal of “avoidance of double reporting” which is intended to remove the
need to send any data twice under both EMIR and REMIT. This is turning out to be difficult in
practice.
In this section, we will first examine the trade reporting requirements of each rule set and then bring
them together.
Trade Reporting for EMIR
What must be reported?
EMIR requires all derivatives trades to be reported, by any party transacting them. This is in contrast
with Dodd Frank in two key ways:
1) Dodd Frank only requires OTC trades to be reported, EMIR requires Exchange Traded
deals(ETD) as well
2) Both sides of the trade must report, using the same Unique Trade Identifier (UTI).
It is likely that exchange traded deals could be reported by the exchanges themselves. However, the
obligation to report remains with the market participant. Lack of clarity about this issue, and about
which Entity IDs to put into certain fields, recently caused the reporting date of ETDs to be pushed
backwards into 2015.
When deciding what a derivative is, careful consideration must be given to the type of instrument
and where it is executed. This is discussed in more detail in the “calculating the threshold “section.
Where data should be reported? EMIR trade data must be reported to a registered “Trade Repository” (TR), a third party who will
make the data available to ESMA runs a trade repository. Several entities have applied to be TRs at
the time of writing and most are detailed in the services catalogue at the end of this report.
The first approvals of registrations are due at the end of September. Reporting to them happens just
over 3 months after approval (so if none are approved, the reporting date would slip again).
When reporting, market participants can either send data straight to TRs, get someone else to do it
on their behalf, or send the data via “Reporting Services”. All of these options are considered in the
services directory at the end of this report.
Which data must be reported?
Detailed data differs per asset class. However, the data can be divided into the following categories:
Entity Identification – Of the parties involved in the trade. Will include the reporting entity,
counterparty and others such as the beneficiary (if not the counterparty) broker etc.
Contract Information - Information about the deal and contract, including where it was
executed. UPIs preferred. Could require a complex product type derivation.
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Transaction Information – Trade level details such as quantity, notional etc., requires the
Unique Trade Identifier.
Trade Type Specific Information - Different sets of fields for IR, FX, and Commodity etc.
Commodity profiles are multi record.
Option Information - Strike, call or put, etc.
Confirm Information – About the trade confirmation.
Clearing Information – Including the Clearer ID and time of clearing.
Status – “New/modify/cancel/termination/compression/valuation update/other.” – Each
time a trade changes it must be resent with a new status.
In addition to the above, FCs and NFC+s must report collateral and valuation information on a daily
basis. However, this reporting will only start 6-months after the initial reporting.
Some details of this data are examined in the “realities of implementation” section below.
When should data be reported? Data typically should be reported to a repository by the end of the next working day. This includes
when some of the data, such as the confirmation data, is missing. It should be sent later in an
update. Trades executed after 4pm count as the next day’s trades in terms of measuring T+1.
Backloading
EMIR came into force on 16th
August 2012. This means that any data on trades in existence then
must also be reported or “backloaded” to repositories. By implication, it is important to locate this
data as soon as possible.
Backloading is required in several stages:
Trades still open on the first reporting date (i.e. February 12th
2014) – 3 months later (i.e.
May 12th 2014)
Trades executed after August 16th 2012 but that matured before the first reporting date- 3
years after reporting date
Trade executed before August 16th
2012 but that were still open on 16th
August 2012 – 3
years after reporting.
Trade Reporting for REMIT
Which data must be reported?
REMIT reporting falls into the following two categories at the highest level:
• Trade Data – Data related to trades and orders
• Fundamental Data – Data related to the physical state of the grid, e.g. outages, loads, etc.
Here we focus on trade data.
REMIT covers Physical Power, Gas, LNG and Emissions, as well as their related derivatives.
Technically, therefore some of the derivatives will fall under both REMIT and EMIR. However, ACER
has put forth a principle of the “avoidance of double reporting”. In theory, this means that if you
report data under EMIR you do not have to report it again under REMIT. However, since REMIT
requires additional data elements to EMIR, it is not yet clear how and if this will work in practice.
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Where should data be reported to?
ACER will be collecting all of the reported data and using it to monitor the market for abuse. A
system called “ARIS” (ACER’s Regulatory Information System) is being built for this purpose.
Because of the large number of market participants, ACER do not wish for data to be sent to them
directly, instead, they need to be sent via intermediaries called “Registered Reporting Mechanisms
(RRMs). These third party facilities will each have their own way of collecting the data and
forwarding it to ACER.
An EMIR TR could also be an RRM, or it may not be one. An RRM that is not a TR could forward the
data to the TR as well, or they may not. This is discussed in the “Data Destinations” section.
What data types must be reported?
REMIT requires pre trade data, i.e. order information, to be reported as well as trade data through
the lifecycle. The order information includes orders for unexecuted deals.
REMIT defines four “Data Views” which different data elements required within each view. These
are:
- Order view – Elements required to be sent when an order record is sent
- Execution view – Elements required to be sent when a trade is executed
- Confirmation/Clearing – Elements required to be sent when a trade is confirmed and/or
cleared
- Non Standard View – Elements required for a complex “nonstandard” trade (see below)
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The data elements can be summarized by this table:
Order Execution Clearing
/Confirm
Non
Standard
Identification Of the various parties, including
broker etc. Likely to require LEIs.
Includes market place ID
P x x x
Contract Info about the deal and contract,
including where it was executed.
UPIs preferred, Could require a
complex taxonomy
p x x
Order Order Type (Market, Limit etc.,) x
Transaction Trade level details such as quantity,
notional etc. + UTI
p x x p+ PDF
Trade type
specific info
Different sets of fields for IR, FX, and
Commodity etc. For commodity
profiles are multi record. Includes
physical data
x x
Option Info Strike etc. x x
Confirm Info When confirmed, details to be filled
in
Clearing Info When confirmed, details to be filled
in
x
Status New/Split/Modify/Cancel/
Terminate/Other
x x x x
The full field list is found in the document on the ACER website at
http://www.acer.europa.eu/remit/Documents/Recommendations%20on%20REMIT%20Records%20
of%20transactions.pdf
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Non Standard Trades
For trades that are considered “complex”, it is only necessary to send a subset of 23 data elements.
In addition, there is a requirement to send a PDF scan of the contract to ACER. Details about how
this will work, and also about which trades are defined as non-standard are not yet known.
Data Destinations Ultimately, EMIR data must reach a Trade Repository, and REMIT data must reach an RRM. However,
there are several different combinations and services available:
1) TR Only – Some EMIR TRs will only accept EMIR data. If choosing one of these, it will also be
necessary to send data to an RRM separately
2) RRM Only – Similarly some RRMs will only accept REMIT data
3) TRs that are also RRMs – some TRs have committed to becoming RRMs
4) RRMs that forward to TRs – some prospective RRMs will accept all data and forward the data
to an EMIR RRM
5) Reporting services – Some third party services are planned that will take in all of the data
and report it to both TRs and RRMs
TRs will not be approved by ESMA before November 9th 2013, and the upcoming RRMs are also yet
to be announced therefore when choosing it is important to note that not all services advertised
may go live and contingency plans should be made.
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Implementing a trade reporting solution
Solution types
Every market participant is required to implement a trade reporting solution in some form. This may
be very simple, for example uploading a trade spreadsheet to a repository, or it may require a large
amount of engineering, for example for a multi-site market participant with several ETRMs. It is also
possible to delegate the reporting to another party, or several parties.
There are several different types of configuration available, which can be summarized by these
levels:
Level Key features Pros and cons Typical
participant type
Delegated Another party reports on the market
participant’s behalf, This can either
be as a specialized service or in some
cases for a set of deals, for example,
an exchange reporting all trades
executed there, or pre trades for
REMIT.
+ Less work for participant
+ Less prone to error
-No audit log for
participant
- Could be expensive.
- Participant is still liable
for errors
Small traders, or
as a partial
solution for any
type
Manual A manual spreadsheet/csv upload to
a repository or reporting service.
Some repositories will offer on
screen trade entry.
+Easy to use for smaller
traders
+Good way to send trades
already in spreadsheets
even for larger players
-Lack of auditability
-Prone to error
Small participant
with few trades
or as a partial
solution for larger
participants
Outsourced Duty of reporting outsourced to
another party. The party will either
have the most of data already, or
provide a simple mechanism to take
the data The provider will perform
some tasks such as data enrichment.
+Less work for participant
+ Less prone to error
- No audit log for
participant
- Could be expensive.
- Participant is still liable
for errors
Smaller traders
that already
execute most of
their trades
outside of their
own
environment.
Direct Sending the data directly to a
repository. RRM and/or a reporting
service.
+ More control
+ Lower running cost
- Could require a large
project to set up
- Requires in house
expertise
Medium and
larger
participants
It is also possible to use a combination of these methods. For example, exchange traded deals could
be sent by an exchange, and OTC ones via another route.
European Energy Market Regulations
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Required Solution Activities While this document is not intended to be a comprehensive guide to building a reporting solution,
here we identify some key tasks that the majority of participants will need to undertake to have a
working solution:
Data sourcing and gap analysis
Before data can be provided to any destination, it must be sourced from somewhere, be it the
E/CTRM(s), trading platform or spreadsheet.
It is important to perform a data gap analysis as early as possible to ensure that you have all of the
required data from each product type traded. This will involve going through each product type
traded, and for each field required (under EMIR or REMIT) ensuring that you know here it can be
found. It is not sufficient to simply map to the source field in an E/CTRM, It is also necessary to
ensure that the business process in place updates this field.
Data mapping and capture
There must be a mechanism in place that can rapidly identify all qualifying trades (new, modified,
voided etc.), extract the required data items for reporting purposes from possibly multiple systems,
and format the data appropriately for transmission to the trade repositories. Furthermore, the data
must be validated for missing items, correct formats and codes, and corrections must be made
manually or automatically prior to transmission.
Whatever systems are in use to capture and process trades including vendor provided, home grown
or even spreadsheet-based solutions, they must contain all of the required data items that are to be
reported. Furthermore, there must be processes in place to ensure the capture these data items for
reporting purposes.
Configuration choice and connection mechanism
It will be necessary to select the “shape” of configuration choice. It is possible to select several
configurations; for example, a large participant could report most OTC and physical trades directly,
but chose to use the exchange’s facilities to report ETD, and to upload some rarely traded physical
deals manually.
If not outsourcing completely and building an internal solution, it will also be necessary to select a
connection mechanism. This could involve either building one internally, or purchasing reporting
software that has adapters built in. The incumbent E/CTRM system may also have built in adapters
to one or more destinations.
Data enrichment
The various reporting destinations require entities and product to use standard identifiers, such as
LEIs, EICs, UPIs, and ISINs etc. There are several entity records for most deal types, and each requires
different product information. In addition, some other information, such as “Counterparty status”
flags are required.
As a result, each trade must be “enriched” with appropriate standard data. The difficulty of this task
varies by number of trades, trade types and source system.
Reporting software will usually offer a solution to the issue, which will be particularly useful to those
with multiple E/CTRMs. In addition, many of the outsourced services offer a partial solution.
Pre trade data
REMIT requires that pre trade information such as order information be forwarded to ACER. The
arrangements for this forwarding are not yet clear. However, it is likely that execution venues will
provide facilities (at a cost) for delivery of such data. Participants should monitor market
developments to see how this will be handled. We will also be covering it in a later report.
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Issues being encountered
This section outlines some issues being encountered in the market by those implementing trade
reporting solutions. Updates will be issued regularly.
LEIs (Legal Entity Identifiers)
An LEI is a globally unique identifier for counterparty. The LEI initiative also arose from G20 desires
after the banking crisis, to create a globally uniform mechanism to identify an entity in a transaction.
This eventually led to the Financial Stability Board (FSB) issuing a paper and outline for how such a
database could be constructed and governed. The global database is not yet ready, but a “pre LEI”
database is being formed, and others already exists in the absence of a final global version.
EMIR will require the use of LEIs, or pre LEIs upon go live, although they have not yet been defined
for all entities.
Market participants will need to:
- Add facilities in place to map their existing entity Ids to LEIs
- Add facilities so that it is possible to store an LEI for each entity going forward.
The UTI (Unique Trade Identifier)
Trades sent to EMIR repositories need to contain a 52 character UTI. Under EMIR, both sides of the
trade must send in a deal with the same UTI. The generation of this ID and the workflow around are
leading to a great deal of uncertainty at the time of writing. In particular:
Generation of the UTI – There is no mandatory mechanism for the generation of the UTI, which has
been left by ESMA to “the industry”. An ISDA working group is currently attempting to provide for a
recommended solution although this is not yet final or accepted by all in industry.
The commonly accepted approach depends on whether the trade is executed on a platform or not. If
it is, then the platform should generate the ID for both parties.
For bilateral trades, the consensus is that the seller should generate the ID and provide it to the
buyer. However until this is agreed, the resolution is as yet unknown.
Workflow around the UTI – However the UTI is generated, it needs to somehow make it into one or
both party’s ETRM systems, and be sent to a repository.
If the trade is executed on a trading platform, it will be necessary to extend the interface between
the platform and the ETRM to capture the UTI before the trade is sent to ESMA.
For bilateral trades, the capture of the ID is harder: the generating party must find a way of
providing it to the other side, and this will need to be electronic since manual entry of a 52 character
code is not an option.
The obvious place for the code to come in is on the trade confirmation. However, that may not
arrive until after the trade must be reported to ESMA.
The solution to the issue will need to evolve over the next months.
Which rules apply to a trade? It is important to have a granular and flexible mechanism to ensure that trades get “routed” to the
correct place under the right rules.
Firstly, the definition of a derivative under EMIR is not always straightforward and subject to change.
The rules as outlined in the “threshold calculation” section require:
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- A “hedge marker” to be placed on all trades in the source system. In some cases, a rule could
be used to derive this, for example if all hedges are in specific portfolios. In other cases, they
will need to be marked manually.
- It is import to have mechanism in place that can deduce whether a trade has been executed
on an MTF. The list of MTFs keeps changing, and this must be factored into the solution
Furthermore for some trades executed via brokers it may be difficult to determine the place
of execution in the first place. Expect the recent FCA ruling to be modified as well.
Similarly, with REMIT, it will be necessary to have a flexible mechanism in place in order to
determine which trades to cover.
Changing requirements
As market participants get closer to go live and further into their projects, more detailed issues are
emerging. At the same time, messages from regulators repositories and others give rise to changes
and intricacies.
It is important to keep a close eye on developments. This can be accomplished over various forums
including the website www.enegrytradingregulation.com and via updates to this report through
time.
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Risk Management EMIR specifies five different measures that must be adopted by market participants:
Timely confirmations – All trades must be confirmed (matched) within a certain timeframe
Portfolio reconciliation- Uncleared bilateral trades must be reconciled between each set of
parties at pre-defined intervals
Dispute resolution – Dispute resolution procedures to be put in place for trades in dispute
for more than 5 days
Portfolio Compression – Certain parties must perform mandatory compression on OTC deals
Daily mark to market/model – Trades to be marked to market or model by certain parties.
The requirement and timeline can be summarised by this chart:
Rule Summary FC NFC+ NFC- Timing
Timely
Confirmation
Bilateral Trades
to be confirmed
(and matched)
within the given
timetable.
T+1 T+2 Requirement for T+7/5
came in on 15th
March
2013. Window narrows
every few months until
August 2014 when the
timings shown here will
be required.
Portfolio
Reconciliation
Uncleared trades
to be matched
periodically
between
counterparties.
Daily for portfolios
greater than 500
trades.
Weekly for portfolios
with between 51 and
499 trades.
Quarterly otherwise.
Quarterly for
portfolios of
more than 100
trades.
Annually
otherwise.
Starts on15th September
2013.
Dispute
Resolution
All to have
processes in place
to identify, track
and monitor
disputes. Formal
procedure if more
than 5 days.
Report
all
disputes
over 15
days
and
15M
EUR
Procedures must be in place. Starts on15th
September
2013.
Portfolio
Compression
OTC trades to be
“compressed”
periodically.
Twice a year for portfolios with more
than 500 trades.
Starts on15th
September
2013.
Daily mark to
market/model
All trades to be
either marked to
market or model
on a daily basis.
All trades that are
sufficiently liquid to be
marked to market
daily and the values
sent as part of trade
reporting. Otherwise
they must be marked
to model and values
sent.
Not required.
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Timely confirmation The timely confirmation requirement of EMIR is intended to reduce risk and encourage a move to
electronic confirmations.
The confirmation deadline refers to the time the trade is confirmed as matched, rather than when it
is sent.
Portfolio Reconciliation and Dispute Resolution EMIR requires that counterparties reconcile their portfolios of uncleared trades from 15
th September
2013 onwards, as follows:
FC and NFC+:
More than 500 trades: Daily
Between 50 and 499 trades: Weekly
49 or less: Quarterly
NFC-:
More than 100 trades: Quarterly
Less than 100 trades: Annually.
Where an NFC- is the counterparty of an NFC+ or FC, the NFC- timings apply.
Generally, for those with many reconciliations to perform, there is a good case for automation, if it
does not already exist. There is clearly far less work to perform for an NFC-, which reduces that case
and will give rise to the reconciliations being performed manually.
However, NFC-‘s are advised to calculate exactly how long this will take. A medium sized utility with
20 counterparties with over 100 trades will still need to do 20 of these per quarter, i.e. one every 3
working days, and also have the overhead of the annual reconciliations, which may be numerous.
Consideration should therefore be given to at least a “semi-automatic” solution.
The reconciliation process In order to reconcile trades, the two parties must exchange the position each thinks it has with the
other. In order to do this each party must provide data to the other so that it will be “matched”.
(Usually via a file). The file will contain a pre agreed set of fields, known as the “key terms” that can
be used to identify a specific trade. In addition, fields such as price and notional and sometimes
mark to market will be sent.
The parties then take each file and compare them using the key terms. Those where the key terms
and positions are the same are declared a “match”. If there is no match or a large difference in views
are marked in dispute. In reality, not all fields will always match, and so the parties declare a
“tolerance” for the key terms.
Those that are in dispute then are checked and if that cannot be resolved, the dispute resolution
procedure commences. There are various ways in which this may happen:
Typical modes of operation
In general, there are three usual modes of operation:
• Bilateral – where counterparties exchange files (either one or both ways).
• Third Party Service provider – Where a third party is involved in the reconciliation, to
organise it as a central service.
• Agent – Where another party performs the reconciliation on the counterparty’s behalf.
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Bilateral reconciliation
Before reconciliation starts, counterparties will need to establish procedures/systems to monitor
how often they must reconcile with each entity. This may vary over time.
Once established, a reconciliation schedule needs to be agreed with the other party (except for daily
reconciliation).
On the day of the reconciliation, the parties exchange data files. In some cases, only one party sends
the file for the other to check. The fields contain the data in the key terms as well as position data.
They then run matching processes, using the key terms and tolerances. If there are “breaks”, the
parties communicate and fix them, or if necessary initiate the dispute resolution procedure.
The matching itself can be performed by specialist software, or using a spreadsheet. Spreadsheets
can be complex in this area, although the introduction of the UTI will make this task easier.
The benefit of the bilateral approach is that it is simple to use, especially for those with a small
number of reconciliations to perform
The drawback is that any counterparty with more than a handful of reconciliations to perform will
need to send a large number of files to different counterparties on the correct dates. This can
become logistically complex and lead to operational risk, and the wrong fields being sent to the
wrong places, risking a breach of confidentiality.
Third Party Service Provider
An alternative of bilateral reconciliation is to use a third party to assist in the process. –Using this
method a third party service such as the triResolve service provided by TriOptima is used centrally to
organise reconciliation. They do not however, perform the reconciliation from a legal perspective.
They simply organise the process and make it easier than a bilateral reconciliation.
When using the service provider model, each subscriber sends a file on a regular basis to the service
provider, containing data regarding other subscribers.
The service then calculates how often reconciliation is necessary and performs the appropriate
scheduling. It then performs the matches and informs the subscribers of any disputes, after
following a prescribed process.
There are several benefits to this approach: Firstly, only one set of data needs to be sent for all of
the subscribing counterparties. This greatly reduces operational risk and the logistical overhead.
The second benefit is that the service will provide scheduling services on behalf of the client. This
removes the scheduling overhead of the bilateral approach. A service provider will be able to
optimise the schedule whilst taking into consideration all of the subscribers simultaneously.
Agent Using this paradigm a third party performs the reconciliation on the participant’s behalf. The entire
process is outsourced to another party, who perform the reconciliation on their behalf. They will be
given the portfolio to reconcile and advise of disputes if they arise and cannot be resolved by the
agent themselves.
Contractual Changes required for Portfolio Reconciliation and dispute resolution Market participants are required to amend their ISDA and other contracts in order to accommodate
these changes, the contract should encompass the new protocols that permit information sharing
for the appropriate key terms in order to reconcile, as well as requiring the reconciliation to take
place.
See the ISDA website for more details.
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Portfolio Compression
Portfolio Compression is the process of reducing the number of trades in a portfolio whilst
maintaining a risk equivalent position.
Reducing “unnecessary” trades with a counterparty reduces credit risk and settlement risk.
EMIR mandates compression for FCs and NFC’s every six months for counterparty portfolios with
more than 500 trades. EMIR also “encourages” compression wherever possible.
Compression is not always easy or desired by all in an organisation, although it is desired by the
credit department and has many benefits once in place in terms of risk management.
Compression can be performed either bilaterally or multilaterally.
Bilateral Compression
When one counterparty attempts compression directly with another, there are several steps:
1- Identify counterparties – It is necessary firstly to identify which counterparties are being
compressed with and when to schedule them for.
2- Identify areas for compression – An analysis of the portfolio must be carried out in order to
determine which trades may be compressed, if any.
3- Agreement of compression – the two entities must then agree the set of trades
4- Execute compression – execution of a compression involves terminating the deals being
compressed, and replacing them with new ones.
5- Mark trades- The new trades must be marked as “resulting from compression” in EMIR trade
reporting. The ETRM system will need to record this as a reason for the trade.
Multilateral Compression
Compression involving several parties can be a great deal more effective than bilateral compression.
Multilateral compression involves viewing the trades between all of the counterparties in a group,
and then reducing them down as much as possible using a combination of trades and closures. The
more parties involved in a compression, the more benefit it will have.
TriOptima‘s triReduce service offers such a service, both within the energy industry and within
banking.
Multilateral compression involves the following steps;
1- Set calendar – multilateral compressions take place periodically (typically quarterly
depending on market characteristics).
2- Send in trade portfolio – each party sends in candidate trades with the other entities in the
group to the service. Nominate trades – each party agrees to the compressions from the
suggestion list
3- Dress rehearsal – on a specific day, the compression is “simulated” by all parties
4- Execution – On a nominated day, all of the agreed trades are closed out and new ones
created. Service suggests trades – the service will suggest which trades can be compressed,
which trades will need to be closed out and which new ones created
A typical cycle lasts two weeks, with trade submission and matching in the first week, and dress
rehearsal and live execution the second week.
As with bilateral compression, all trades resulting from a compression must be marked and reported.
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Is it worth compressing if it is not mandatory?
As outlined above there are many benefits to compression, in particular credit risk reduction. One
other benefit that applies in particular to non-financial counterparties, is the reduction in total Gross
Notional Value. By compressing enough trades, an NFC- may be taking them further away from the
threshold, which could be considered a great advantage. Other benefits include:
o Capital cost: With the Basel III leverage ratios it is quite beneficial to reduce gross
notional
o Balance sheet: Compression also reduces gross mark-to-market, which under IFRS
accounting will decrease your balance sheet
o Operational costs and risks: Compression leads to fewer trades that needs to be
processed through its lifecycle, i.e. fewer lifecycle events like scheduling,
settlements, payments, etc. to process, where each step has a cost and risk
associated
Daily mark to market/model
All FCs and NFC+s are required to mark all trades to market daily. If this is not possible then trades
must be marked to an approved model.
It is also necessary to report these valuations daily, as part of trade reporting, six months after the
initial reporting date.
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European Regulatory Solutions Directory
We have made an effort to identify a variety of possible solutions for the European Regulatory
environment and assembled this directory. This is most certainly not the total picture and we will add
to it through time to try to keep it up to date. Please note that the product descriptions are often
lightly edited versions of the vendor’s web content associated with the product and we are not
responsible for any errors in this content. Please also see the CTRMCenter software directory.
Types of service and software There are a variety of services and software that can be considered when implementing trade-
reporting solutions:
Trade Repositories – Trade Repositories that have applied under EMIR.
Reporting Services – Third party services to which data can be reported and sent on to a TR
or RRM. In most cases these will be acting as RRMs
Specialist Reporting and aggregation software – Software specifically designed to take in
data from one or more sources including ETRMs and reference data systems and send it to
one or more Trade Repositories and /or reporting services
ETRM offerings – Adapters from ETRM vendors that link their systems (only) to one or more
destinations.
Exchange Offerings – Exchanges offering to report information about deals executed there.
Trade Repositories
As of the time of writing, several repositories have applied for authorization under EMIR. These will
not be approved until at least the 24th September 2013. Once approved, the reporting requirement
starts 3 months and 5 days later (i.e. the 1st January 2014).
A number of organizations have applied to ESMA for registration as Trade Repositories including;
• the CME Group,
• the London Stock Exchange,
• Intercontinental Exchange (ICE) Trade Vault,
• REGIS-TR,
• LSE Unavista
• The Independent Data Repository,
• KDPW-TR and,
• The Depository Trust and Clearing Corporation (DTCC).
It is interesting to note the provenance of several of these applicants as some already act as Swap
Data Repositories in the USA and others as approved reporting mechanisms under MiFID. All of
these entities plainly have some degree of experience in collecting and storing trade data.
In the USA, Swap data repositories (“SDRs”) were new entities created by the Dodd-Frank Wall
Street Reform and Consumer Protection Act (“Dodd-Frank Act”) in order to provide a central facility
for swap data reporting and recordkeeping. Some seven entities applied to become SDRs but two
applications were later withdrawn and a third does not cover commodities as an asset class. The
four remaining include BSDR LLC, CME, DTCC and ICE where BSDR LLC is a new entity specifically
created for the purposes of becoming an SDR. CME, DTCC and ICE are all applying for registration
under EMIR too.
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LSE has some experience as regional trade repositories for MiFID. Only REGIS –TR and the
Independent Trade Repository Ltd. have no real prior track record having been specifically set up for
EMIR, although with a test system having been live already for several months; REGIS TR is proving
to be popular. KDPW-TR is the central securities depository of Poland and has some experience of
working with large amounts of trade data as a result.
CME Group
The CME's Swap Data Repository Service already provides public data on swap transactions and
stores confidential trade and position data for regulatory purposes, in accordance with the Dodd-
Frank Act. The CFTC approved its repository service as a swap data repository (SDR) for credit default
swaps, interest rate swaps, commodities and foreign exchange asset classes.
CME Europe's cross-asset trade repository solution is to launch on 1st January 2014 in line with the
first reporting requirements, In addition to operating for CME's global clearing and execution
facilities, it will accept non-cleared bilateral OTC and exchange trades executed anywhere in the
market.
The CME Repository Service leverages the CME ClearPort front-end, a gateway to CME reporting and
clearing post-trade services. This common point of connectivity offers messaging efficiency and
lower maintenance costs.
LSE
The London Stock Exchange Group also has applied to ESMA for its UnaVista platform to be a trade
repository across all asset classes for both exchange traded derivatives and OTC derivatives.
UnaVista currently operates as a European Approved Reporting Mechanism (ARM) under the MiFID
regime for all asset classes and markets. LSE believes that by becoming a trade repository for all
asset classes across all venues, its customers will only need to connect once to meet both their EMIR
and MiFID reporting requirements.
As a MiFID Approved Reporting Mechanism (ARM), UnaVista already reports c1 billion multi-asset
transactions annually to multiple regulators, including over 300 million derivatives on behalf over
600 clients. As a hosted central utility, UnaVista will utilize its inbuilt reconciliation engine to
facilitate the ESMA requirement for contract details to be reconciled before reporting to the various
different trade repositories
ICE
ICE has decided to establish ICE Trade Vault Europe Limited (ICE Trade Vault Europe) as a Trade
Repository (TR) for the reporting of derivatives trade data to meet requirements of the European
Market Infrastructure Regulation (EMIR). It plans to serve the commodities, credit, interest rate and
foreign exchange asset classes.
In June 2012, ICE Trade Vault, LLC (ICE Trade Vault US) became the first Swap Data Repository (SDR)
in the U.S. to receive provisional regulatory approval from the CFTC and the Vault began accepting
credit default swaps trade data in October 2012 followed by commodities trade data in February
2013. Since its inception, ICE Trade Vault US has already accepted around fifteen million trades.
Since ICE provides direct access to the core energy and commodity market infrastructure, it believes
itself to be a qualified trade repository for those markets. Through the ICE trading platform and
clearing houses, as well as ICE eConfirm, ICE sees an opportunity to simplify workflows and trade
data reporting requirements for market participants, helping its customers achieve efficient and
cost-effective compliance with evolving regulations.
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• Utilizes ICE eConfirm as the front-end application for counterparties to submit data to ICE
Trade Vault, thereby enabling market participants to use their long-established connectivity
solutions with fewest modifications possible
• Distributes real-time trade data to market participants and provides historical data for online
viewing and access. Participants will control permissions for regulatory reporting purposes
as well
• Features a high-performance, scalable data warehouse and reporting platform
ICE is likely to also act as an RRM.
REGIS-TR
REGIS-TR is a European trade repository created as a joint venture by Clearstream Banking S.A.
(Deutsche Börse Group) and Iberclear (Bolsas y Mercardos Españoles). Its services have been
operating live since 2010. Derivatives based on interest rates, foreign exchange, commodities and
equities are currently eligible for registration at REGIS-TR, which will enable full compliance with
EMIR for all asset classes and listed derivatives before the reporting obligation comes into places.
Key characteristics of REGIS-TR are as follows;
• European provider, fully compliant with EMIR, with a Financial Market Infrastructure (FMI)
license
• Co-owned by two neutral securities services infrastructures, providing services from
Luxembourg, holding data exclusively in the EU
• One-stop-shop for the registration of all types of derivatives on all asset classes
• Flexible access for all types of counterparties (financial and non-financial entities)
• Competitive price list allowing full price transparency and predictability. Fee caps for all
users
• Commitment to be a REMIT RRM
• Flexible trade delivery mechanism spanning simple upload of csv files to a web services
based XML sending mechanism.
REGIS-TR will enable full compliance with EMIR’s derivatives reporting requirements. However, it
also allow customers to meet their obligations for transaction reporting under the Markets in
Financial Instruments Directive (MiFID), the Regulation on Energy Market Integrity and Transparency
(REMIT) and repo agreements and securities lending reporting under the Capital Requirements
Directive (CRD IV).
In addition to its statutory trade repository activities, REGIS-TR may also offer its clients extra
services such as electronic matching and confirmation services, independent valuation services and
exposure management.
REGIS-TR and TriOptima have also recently announced that they will provide portfolio reconciliation of
REGIS-TR’s trade repository data with data in TriOptima’s triResolve reconciliation service for OTC
derivatives as requested by their clients.
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The Independent Trade Repository
CapitalTrack, a vendor of a data transfer database and network, Capital Market Daily Portal, a data
network, technology and services vendor, and Fincore, a software vendor, have established a new
company, Trade Repository, and hope to win ESMA approval for its Independent Trade Repository
product.
The Independent Trade Repository will allow users to submit the details of their trades on
spreadsheets to its online database. The Independent Trade Repository believes that it will be
particularly attractive to market participants because it is not affiliated to a clearinghouse and
because the companies operating it have an expertise in data management.
DTCC
DTCC’s Global Trade Repository (GTR) Service provides full coverage of all cleared and uncleared OTC
derivatives products within each major asset class. Trade submissions will be supported for 100% of
products traded in each asset class regardless of whether trade is electronically processed or
bespoke – paper confirmed.
A customer of a Repository may selectively elect to enable reporting for one or more
jurisdiction/regulation that is supported by that Repository. For example, a member of the DDRL
legal entity may elect to report to any combination of ODRF, HKMA, CSA, and ESMA.
The above TR entities can also be registered as foreign TR in other jurisdictions, e.g. Canada and
Australia.
The GTR service supports a multitude of data submissions including real-time price reporting,
transaction details, confirmation records, and valuation data.
The GTR service provides open access to third-party providers to promote efficient reporting
processes – this includes:
• Electronic Execution Platforms
• Confirmation Providers
• Clearing Houses (CCPs)
• Inter-dealer brokers
• Custodians
• Any other middleware providers
The GTR is brought to the energy industry by EFETNet who have partnered with DTCC in the US and
will offering forwarding of trades under EMIR to the repository via the eRR service.
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KDPW-TR
On 2 November, the Central Securities Depository of Poland (KDPW) launched the trade repository
service (KDPW_TR) in response to Regulation No. 648/2012 of the European Parliament and of the
Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (“EMIR”).
According to Article 48.5a of the Act on Trading in Financial Instruments of 29 July 2005 as amended
by adding provisions concerning novation, the Central Securities Depository of Poland (KDPW) may –
under the rules set out in separate rules – collect and store information concerning trade in financial
instruments and information concerning such instruments. The detailed operating rules of KDPW_TR
are set out in the Trade Repository Rules.
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Reporting Services
NASDAQ OMV
NASDAQ OMX already provides a service for Nordic Market Participants for MiFID trade reporting
(TRS) to local Financial Supervisory Authorities (FSA) and will extend this reporting service to cover
EMIR derivative reporting to Trade Repositories.
It offers its members reporting services regarding:
• Establishing connectivity with relevant Trade Repositories
• Reporting of derivatives contracts traded and cleared on NASDAQ OMX’s markets
• Reporting of OTC derivatives transactions that are not traded or cleared by NASDAQ OMX
• Ability for members to append required data to derivatives transactions for reporting
• Daily updates to the Trade Repository of collateral and mark-to-market valuations
• Reporting feedback of submitted reports
NASDAQ OMX further aims to extend its service to include reporting obligations under REMIT for the
energy market.
It provides the option of full service reporting of all required data and a complimentary reporting
service where NASDAQ OMX and the Customer jointly complete the reports.
For derivatives cleared with NASDAQ OMX where the Market Participant keeps position-segregated
accounts per beneficial owner, NASDAQ OMX can complete the Trade Repository report with all
required data without the need for interaction from the Customer. For Customers with a setup
where NASDAQ OMX does not have access to all required data or where the Customer selects to
submit its own reports to a Trade Repository but need NASDAQ OMX to complement their reports
with some data, it will offer a partial reporting service according to the alternatives described below:
• For Customers that connects to a Trade Repository themselves for reporting, NASDAQ OMX
will duplicate the missing data at the Trade Repository to the report created by the
Customer.
• Alternatively, the Customer can complete partial reports created by NASDAQ OMX and
submit the reports to the Trade Repository through NASDAQ OMX. This option does not
require direct connectivity to a Trade Repository for the Customer.
• OTC derivatives transactions that are not traded or cleared by NASDAQ OMX may also be
submitted via the service interface. This option, also, does not require direct connectivity to
a Trade Repository for the Customer.
The service is provided with a flexible interface where the Customer can select to interact with the
service via a provided application or by uploading fixed formatted files.
The Trade Repository application is a desktop application that enables the Customer to perform the
following activities:
• View status of submitted reports
• View status of individual reported transactions
• Search for historical reports
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• Review and confirm NASDAQ OMX generated reports
• Complement partial NASDAQ OMX generated reports with additional data before
submission
• Create new transactions for reporting
• Export data to external systems
Vendor – Nasdaq OM
http://www.nasdaqomx.com/europeanclearing/traderepositoryservices/
EFETnet eRR
EFETnet’s electronic Regulatory Reporting (eRR), is an industry wide solution to an industry
wide problem; implementation of regulatory reporting requirements is having a significant
impact on the wholesale European energy market. Operational processess and systems are
under pressure because of the changing regulation and investments in IT are inevitable to
comply with all regulatory reporting obligations. EFETnet developed eRR, a single
standardized interface for regulatory reporting, delivering reporting compliance for REMIT,
EMIR, MIFID, CRD IV etc. eRR operates through a single open industry standard interface
providing connectivity to the different regulatory repositories.
eRR will be offered as an add on to EFETNet ‘s confirmation matching service, which is
already used widely in the industry. Trade information will be sent using the same protocol
and format and for confirmation matching. Trade information will only need to be sent once
for both confirmation and regulatory reporting.
EFETNet uses the CpML format to represent trades. In order to encourage that use of this
format as a standard, its management is now being given to an independent body run by
EFET and the CIO Council. This will permit other vendors to use CpML in order to encourage
interoperability. The initiative to carry this out has already begun.
Vendor – EFETnet
http://www.efetnet.org
TrayPort Complete
Trayport Complete is designed to reduce the operational costs and delays associated with
trading energy commodities. The Complete suite of real-time solutions will provide market
participants with transparency and control over their post-trade activity. With Complete,
users will be able to accurately manage and monitor their post-trade workflows across the
160+ markets accessible through Trayport's platform immediately following the trade.
Complete will be seamlessly integrated with existing Trayport products and will enable users
to:
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• Clear – Users can see the status of trades in real-time across all clearing houses and
counterparties on the Trayport network through one screen. Complete Clear is live
and available for CME ClearPort, LCH, MEFF, NOS and SGX. Connectivity to European
Commodity Clearing AG (ECC) and OMIClear will be announced in the coming weeks
• Confirm – Users will be able to confirm standardized terms of a trade immediately
post execution with up to 400 counterparties and 17 brokers on the Trayport
network. Complete Confirm will enable users to define their own confirmation
processes and workflows to meet their internal requirements. This will improve
efficiency, optimize workflows and reduce operational risk and the processing costs
associated with energy trading.
• Report – Users will be able to report as close to real time as they choose to
European regulatory authorities and trade repositories. Complete Report will be
designed to satisfy REMIT and EMIR regulatory reporting obligations at the point of
execution. Further reporting obligations and jurisdictions will be added in the future.
• Control – With Complete Control, users will be able to manage post-trade execution
with transparency and control. The real-time monitoring application will allow all
counterparties to the trade to track the progress of their trade and immediately
identify and resolve any questionable trades at the point of execution, significantly
reducing operating risk and cost.
Vendor – Trayport
http://www.trayport.com
Specialist Reporting and aggregation software
EMIR-ate.com
emir-ate.com is a service provided by Treamo Business Consulting GmbH. and is a cloud-based SaaS-
solution that helps corporates comply with the reporting requirements of EMIR. It interacts with
existing systems and tools (TMS, spreadsheets, trading platform) as well as with the Trade
Repository. It is a service that ensures EMIR compliance at the press of a button.
The trades will be reported via XML files. At the moment, the Trade Repository requires approx. five
minutes for the return message that either confirms the correctness of data or contains a list of
errors. EMIRate will convert these status messages in an understandable format and will present the
result of the return message in the list of trades, where users can, for example, filter all those
transactions, which have been sent but not yet acknowledged. The same also applies to messages
regarding the reconciliation status.
Vendor – Treamo Business Consulting GmbH
http://www.emir-ate.com
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DeltaconX/Tradelogic
DeltaconX Captures the compliance data held in your trading, financial, and logistical systems,
transforms them into the correct message structures, and routes them to the appropriate regulatory
reporting destination such as Trade Repositories, CCPs, RRMs, ARMs, and ACER. Response and status
messages are captured as part of the submission process and relayed back to the source systems. A
full audit trail of data processing and transfers is maintained. There is no need to upgrade your
trading system as all the required and missing data can be added directly in DeltaconX.
DeltaConx is being offered to the market together with TradeLogic as implementation partners.
Vendor: CH Consult GmbH
http://www.deltaconx.com
Finalyse
FINALYSE offers an automated solution for the new European Market Infrastructure Regulation
(EMIR). This solution can be easily implemented on site or externalized towards Finalyse (Third
Party).
The goal of this solution is to allow customers to be EMIR compliant with a minimum of investment
costs and to benefit from our expertise in terms of European regulation and implementation
solutions.
The main advantages of the solution are:
• EMIR Compliant Data Model
Our EMIR data model is compliant with the new regulatory standards of the European
Securities and Markets Authority (ESMA) and is built according to the most modern and
advanced data model design techniques (full auditable, security and normalization).
Furthermore, it will store a complete history of all transactions.
• Automated Data Quality Checks
Our EMIR data model is verifying the data for completeness and is transforming the client’s
specific naming conventions into the EMIR required taxonomy. Specific data quality errors
are monitored and reported for improvement.
• Automated Reporting to Trade Repository
Our solution is an automated process flow for the reporting of modifications, valuations and
trade terminations towards one of the major trade repository systems. Furthermore, the
process reports information coming back from the TR (e.g. uncommitted trade reports).
• Easy Implementation or Full Outsourcing
Finalyse’s solution for EMIR consists of a data model concept and process flow which can be
easily implemented on site. The remaining workload is to build a bridge between our ready-
to-use solution and the client’s internal data system(s). Furthermore, customers can
delegate the reporting as well towards Finalyse, which will act as Third Party.
Vendor – Finalyse
http://www.finalyse.com
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Seven2one
Steria Mummert Consulting AG and Seven2one Informations systeme GmbH offer companies subject
to reporting requirements a mature, holistic solution for secure, transparent and cost efficient
reporting that is fully compliant with the EMIR and REMIT regulations.
The solution includes;
• EMIR/REMIT compliant data model
• Automated collection of data from upstream systems and reporting: any data format
possible, no adaptation required
• Stable, automated and auditable reporting processes
• Integrated data quality checks ensure highest data quality
• Simple and transparent monitoring of data, processes and reports
• Easy implementation in your own company, full outsourcing or SaaS
• Can be expanded to comply with future reporting requirements (e.g. MiFID, Bafin)
• Secure investment with added value and full cost control (fixed price offer)
• Wide variety of functions (portfolio comparison, risk cockpit, compliance relevant
evaluations, e.g. market manipulation, market abuse)
• High professional utility, e.g. mapping of electricity products with complex profiles, mapping
of orders for REMIT, serves all asset classes (FX, IR, commodities)
• Immediate implementation, project can be started immediately
• Full control over reportable data, data streams and generated reports
• Reporting with added value: expandable without programming to comply with further
reporting obligations (e.g. MiFID, BAfin) even up to the production of an internal reporting
tool for trading and risk management
• Tried and tested standard software solution offers a high degree of reliability
• Rapid integration of new reporting obligations through modular updates
• Strong partners offer extensive experience with both the technology and sector
• A broad range of services provide optimum support - from professional consulting on the
regulatory framework to the implementation of an automated solution to operation of the
software
Vendor – Seven2One
http://www.seven2one.de
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Impendium Elements
Impendium Systems Elements is a Private Cloud Platform that enables you to be compliant with
multiple regulations throughout the world using a single solution. Unlike traditional approaches and
vendors we incorporate the technical elements of common global regulations onto the Platform
enabling you to be compliant sooner. Report to regulators, central banks or even internal
departments using Elements in a timely and cost efficient manner whilst having a complete single
view of your regulatory data.
Elements is a specifically engineered regulatory platform. Impendium Systems Regulatory Advisory
Board – made up of industry and regulatory experts – continuously studies the global regulatory
roadmap and ensures that key regulatory components are incorporated directly into the Platform.
Elements services many current financial regulations including as Dodd-Frank, EMIR, REMIT and
MiFID and work is underway on future regulations such as MiFID II and MAD II.
Vendor – Imperium Systems
http://www.impendiumsystems.com
Lombard Risk REFORM
The Lombard Risk REFORM platform is a highly configurable solution designed to help firms manage
predominantly trade-related processes – such as pre-/post-trade processing and regulatory
transaction reporting.
Right now firms are using REFORM to meet the global regulatory transaction reporting
requirements. Lombard Risk REFORM is designed for real-time regulatory transaction reporting, will
interface seamlessly with an organization’s banking (or other) systems, and is ideally suited for EMIR
(as well as Dodd-Frank, MiFID and REMIT) that are being introduced to monitor and regulate the
OTC derivatives market.
Vendor – Lombard Risk
http://www.lombardrisk.com
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OpenLink – RegCube
The EMIR and REMIT business intelligence solution is an extension of OpenLink's CubeIntelligence
portfolio. The new online analytical processing (OLAP) based cube offering provides financial
institutions and organizations in other verticals, particularly energy firms, participating in energy and
financial trading a speedy and cost-effective way to comply with the new reporting and
reconciliation requirements.
The CubeIntelligence team has developed the OpenLink REG Cube to ensure clients continue to have
access to the market while remaining compliant with the new regulations set to come into force this
year.
The OpenLink RegCube offers firms the ability to:
• Generate the regulatory reports that firms must provide daily to trade repositories and
registered reporting mechanisms
• Send the data to EMIR TRs and REMIT RRMs
• Calculate and record the gross notional values in line with EMIR
• View the EMIR and REMIT values for the entire firm and also drill down, by all categories into
trade level detail if required
• Easy integration of multiple source systems (whether produced by Openlink or not) using a
simple interface which offers trade enrichment with reference date and other complex rule
based transformations
• Specify which trades, books or products are in scope of the regulations so users can filter on
these criteria to calculate the EMIR and REMIT values for the in-scope trades only
• Enrich and transform data before sending to the Repository using a complex transformation
engine
• Perform bilateral portfolio reconciliation using the data already in the cube combined with
file production and matching facilities
The cube is integrated with other cubes such as the Risk Cube. It can be used as the basis of a cross
company business intelligence solution.
Openlink also supply an “accelerator” from Endur and IRM so that those systems can be connected
to the cube with a short implementation time.
Vendor - OpenLink Financial
http://www.olf.com
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eOpt PriceHub e·Comply
PriceHub e·Comply has been developed by e·Opt Solutions, a Germany based provider of solutions in the
Energy Trading space. It is a comprehensive tool for Regulatory Reporting under EMIR and REMIT and is
targeted towards the obligations of most medium to small sized energy companies in Europe. It is a viable
tool for this market and though currently built for EMIR and REMIT, it can be easily extended to serve
future Regulatory challenges.
e·Comply has an intuitive and transparent workflow. It offers extensive Reporting and interfacing
possibilities as well as an open data model for upstream source systems, thereby making bespoke
interfacing to ETRM or other systems achievable with limited effort. e·Comply already has a downstream
interface for REGIS-TR and as other Repositories and RRMs expose their interfaces, e·Opt plans to update
its interfacing as well.
Two key differentiators of e·Comply have are firstly its ability to seamlessly report Orders to Trade under
REMIT, and secondly its Third Party Reporting module. The former uses online interfacing to Trayport and
other platforms to gather orders. The Third Party Reporting module allows companies to offer Reporting
Services to smaller clients with limited resources and trading operations.
With Regulators expected to be increasingly intrusive, the Trade Annotation function is a useful tool to
answer background questions on Trades and Orders.
e·Comply has been built as a comprehensive Compliance tool for organizations, rather than being limited
to EMIR and REMIT. It is deployed as an inward as well as outward looking tool, helping Compliance
Managers to satisfy internal as well as external demands.
The team behind e·Opt, led by its CEO, Rajeev Bhatt traces its roots to years of Energy Trading and Risk
Management experience. The PriceHub suite with its various modules for Forward Curves, Price Data
Management, Pricing and related areas, have been built using their experience in Trading and
Technology.
Vendor – e Opt Solutions
http://www.eopt.org
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Pioneer Solutions Compliance Tracker
Pioneer Solutions' ComplianceTracker provides enterprise-wide compliance tracking,
performance monitoring and reporting for corporate, regulatory, environmental and other
compliance requirements.
ComplianceTracker supports the following:
� Compliance requirements administration
� Performing activities and monitoring
� Approving activities and monitoring
� Triggers and exception management
� Compliance management
� Reporting
Vendor – Pioneer Solutions
http://www.pioneersolutionsglobal.com
E/CTRM offerings
It is anticipated that most of the E/CTRM vendors will be involved with initiatives to ensure that they
too are ready for the new regulations and many are particularly in the energy side of the business.
Mostly, this involves insuring that their offerings include the ability to capture all of the data items
required for trade reporting both in terms of the database and screens to enter the data. Some may
go beyond this fairly minimal requirement such as OLF and Pioneer who have both announced other
initiatives (see the listings elsewhere in this directory). Other vendors that have been proactive in
marketing their capabilities to date have included Allegro and Contigo while Triple Point has been
actively involved as well. These vendors have various connectivity tools as well that might well play a
role in communicating or reporting to trade repositories or reporting services.
Many of the E/CTRM vendors will also be keen to emphasize their reporting, audit trailing and
workflow capabilities with regard to REMIT and trade monitoring. Only SunGard can boast a true
trade surveillance product (see entry in this directory) but many others will feel that they can offer a
number of tools to inspect and analyze trade data.
Allegro
Allegro Derivative Regulation provides a transparent and structured process to manage the
transformation of trade execution and valuation data into required regulatory standards for
EMIR/REMIT and directly transmits this data to registered trade repositories and reporting
mechanisms. Allegro also provides monitoring against clearing thresholds and facilitation of
portfolio reconciliation and compression requirements.
Vendor: Allegro Development
http://www.allegrodev.com
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Contigo
Contigo’s enTrader is a sophisticated multi commodity energy trading and compliance
platform. enTrader has been designed to be easy to use, easy to implement and delivers
client benefit quickly, without an extended implementation and configuration period.
enTrader provides a scalable platform, and is currently being used by energy companies
ranging from new market entrants through to some of the largest European utilities. It is
equally suitable for small trading houses, brokers and market makers with no physical assets
and a tight commodity coverage through to the largest financial and physical trading asset
heavy organisations. This includes companies operating in multiple markets with multiple
currencies and with international fuel logistics chains.
enTrader has been designed to handle all of the data required by EMIR and REMIT in
accordance with the current specifications. All of the fields required by the regulations are
stored as per the rules, and the system is capable of handling the different aspects of rules,
such as EMIR trade statuses, LEIs, product identifiers etc.
Contigo is working with its clients in order to be able to send data to EMIR Trade
Repositories by the end of 2013. The system will also handle REMIT reporting, from both a
trade data and fundamental data perspective.
Vendor: Contigo
http://www.contigoenergy.com
Triple Point
Commodity XL is being enhanced to support the key requirements of the REMIT and EMIR
regulations in the area of transaction reporting, mitigation of operational risk, clearing
threshold monitoring, and trade life-cycle auditing. For these and related financial regulation
(e.g. Dodd-Frank), the underlying business logic is modelled in Commodity XL so transactions
are monitored, processed and reported according to the governing regulations. Users need
to choose their preferred Trade Repository, CCP, and Electronic Confirmations service
providers so that appropriate communications channels may be configured within
Commodity XL.
For EMIR ‘Timely Confirmation’, EFET eCM and ICE E-Confirm standards for electronic
confirmations are supported. For EMIR and REMIT transaction reporting, connections to
RegisTR and ICE Trade Vault trade repositories are offered, and will be completed in time for
the commencement of EMIR transaction reporting, based on the current ESMA ITS RTS
documents and timelines. Connectivity to other services such as EFET eRR and ACER ‘ARIS’
can be configured.
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For REMIT requirements regarding anti-market abuse, and transparency, Commodity XL
provides a full log of all user interactions with the database regarding the trading life-cycle.
This audit log can be inspected by external authorities in the event of an investigation into
suspicious trading activity as defined under REMIT, MAD/MAR, and MiFID.
Vendor: Triple Point
http://www.tpt.com
SunGard
SunGard are delivering an EMIR/REMIT solution to Aligne clients through the implementation of
a standard adaptor. This adaptor utilises the flexible Aligne 3.0 AUX fields to allow clients to
augment native Aligne data through the Importer and then store this on the Aligne database
before communicating an EMIR file to accredited Trade Repositories using standard Aligne
ReportServer functionality.
For those clients who wish to create datastores outside Aligne, standard Aligne reporting
functionality can be used to create exports of Aligne-held data.
By leveraging off the knowledge gleaned by successfully providing SunGard clients with a
solution the US Dodd-Frank, SunGard are confident that the EMIR/REMIT Adaptor will be
delivered in time for the commencement of EMIR reporting in early 2014
Vendor: SunGard
http://www.sungard.com
OpenLink
See entry above for the RegCube.
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Portfolio Reconciliation/Dispute Resolution
In the area of portfolio reconciliation, we are currently aware of only one third party service (there
are bilateral solutions and agents available)although we understand that others maybe planned by
EFET, for example. Additionally, some of the data repositories such as REGIS-TR will perform
portfolio reconciliation as a part of their activities and it is conceivable that they may offer such a
service in the future. Otherwise, portfolio reconciliation will be a largely manual process.
TriOptima triResolve
triResolve is designed to help manage counterparty exposures and provides portfolio
reconciliation, margin call management and dispute resolution. triResolve highlights any
areas of dispute from the individual transaction level up to the margin call. Users have
access to a web-based, flexible platform that enables communications between
counterparties and even internally to provide detailed information to resolve differences. In
the proactive reconciliation process, differences are researched immediately and resolved so
they don’t persist contributing to disputed collateral calls. However, if a collateral dispute
does arise, the triResolve communications capability enables counterparties to research and
resolve the problems in real time.
triResolve is an alternative to bilateral portfolio reconciliation, which can quickly evolve into
a messy process, which involves sending around a great deal of files and is very prone to
error.
triResolve has applied its expertise to the range of challenges in the bilateral collateralization
process introducing margin call calculation and administration functionality as well as
reconciliation of key ISDA CSA terms. Margin calls can be issued, accepted or disputed on
triResolve in a manner that complies with the ISDA standard for electronic margin calls.
By identifying trade mismatches with counterparties, CCPs, DTCC, and/or custodians through
an automated reconciliation of OTC derivatives and securities financing portfolios, this daily
independent verification of books and records ensures that users can:
• Identify discrepancies in trade valuations by trade, portfolio, or underlier
• Increase transparency of operational issues by identifying systemic booking and
valuation issues
• Resolve identified issues by communicating with internal departments or with
counterparties through triResolve’s centralized web service
triResolve is a web-based solution into which users upload their portfolios. Currently the
service has over 7 million trades being reconciled regularly through triResolve. A web-based
community network with around 300 institutions is using the service. triResolve performs
over 24,000 group reconciliations (or 106,000 legal entity level reconciliations) per week.
Vendor: TriOptima
http://www.trioptima.com
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Portfolio Compression
For portfolio compression, we are only aware of one multilateral service at this time although other
solutions are being discussed, such as EFET, for example.
TriOptima triReduce
Multilateral termination removes transactions and consequently reduces the need for
collateral requirements by keeping portfolios trimmed down. Participating in triReduce
cycles reduces both the regulatory and economic capital costs associated with OTC
derivatives, especially for capital-intensive emerging market transactions. Periodic
compression will eliminate capital charges for risk-weighted assets appearing on the balance
sheet. With fewer outstanding OTC derivative trades, a firm can manage its current
exposures more effectively by reducing collateral management costs and minimizing balance
sheet growth. Compression will also facilitate managing potential future exposure for
transactions that cannot be collateralized. When trades are eliminated, they no longer
require periodic payments to be calculated and settled, reducing operational costs. In
addition, potential errors and the costs associated with resolving errors, including
operational risk capital charges, are eliminated.
Using a multilateral system offers a great advantage over bilateral compression since the
amount compressed can be a lot higher. A multilateral system is only useful if it has critical
mass, which is an advantage of TriReduce.
By August 2013, TriOptima’s 230 triReduce participants (including major energy houses and
dealer banks), have eliminated $354 trillion in notional principal outstanding in IRS, CDS and
Commodities.. The impact on the interdealer notional outstandings as reported in the DTCC
Trade Information Warehouse and the BIS statistical surveys has been significant.
triReduce is a web-based service that does not require any software installation or elaborate
preparation. The service is accessible to institutions with a qualifying portfolio.
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Vendor: TriOptima
http://www.trioptima.com
Trade Surveillance
We are aware of three trade surveillance solutions for commodities but there are many more for
other asset classes that most likely will be made available for commodity market players use in time.
SunGard Protegent
Protegent Surveillance helps market participants mitigate reputational, internal and
regulatory risks. With Protegent Surveillance, firms can detect suspicious trading activity and
address supervision and suitability requirements. The solution helps firms identify
questionable transactions and high-risk positions, streamline review processes, support
audits and respond quickly to regulatory and legal inquires. Protegent Surveillance helps
firms detect a broad range of issues including commissions, concentration, suitability,
licensing, breakpoints, market manipulation, AML, restricted holdings and insider trading
activity. Deployment options include a full in-house implementation or a SunGard hosted
ASP service module.
Features
• Identifies questionable transactions and positions
• Provides alert scoring with justification and auto escalation
• Supports issue resolution workflow using a robust alert management functionality
• Easily accessible web-based user interface
• Allows personal and shared watch lists
• Provides historical data snapshots and statistical reporting
Vendor: SunGard
http://sungard.com/campaigns/fs/globaltrading/360trading/solutions/compliance/proteg
entsurveillance.aspx
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Oracle Financial Services Energy and Commodity Trading Compliance
Oracle Financial Services Energy and Commodity Trading Compliance (ECTC) applies
sophisticated pattern recognition techniques to monitor trading and market-making
activities regarding regulatory compliance and quality of execution.
The solution provides trade-by-trade visibility into interactions between traders and other
market participants to identify potentially problematic practices or inferior order handling.
Oracle Financial Services Energy and Commodity Trading Compliance covers multiple
instruments, market segments, jurisdictions, time zones, currencies, and market structures
through the use of behavior detection scenarios to identify trading anomalies.
Additionally when deployed in combination with Oracle Financial Services ECTC Analytics the
solution enables compliance and supervisory users to further explore their trading data for
unusual trends, patterns, or other behaviors of interest thus providing a powerful alert and
investigation solution.
• Flexibility and Configurability – users can readily tailor the application to meet any
specific needs of the firm
• Expedited Implementation Processes – provides multiple approaches to data
acquisition that can get you up and running quickly and efficiently
• Automated Alert Correlation – automatically searches across all alerts to identify
potentially undiscovered relationships
• Integrated Case Management – users can generate new cases or promote existing
alerts to cases enabling a more holistic and enterprise approach to compliance risk
management
• Highly Configurable Scenarios
• Comprehensive Instrument Coverage
Vendor – Oracle
http://www.oracle.com/us/industries/financial-services/energy-commodity-trading-
compliance-170563.html
NICE ACTIMIZE
The Actimize Energy Trading Compliance solution provides automated trade surveillance and
detection capabilities targeted specifically for institutions that must comply with regulatory
requirements associated with energy trading standards set by the CFTC, FERC, FTC, European
Commission, and ACER.
Automated surveillance of internal policies/risk limits and external regulatory issues, with
capabilities to correlate business communication, market news, and trading activity
Multi-dimensional coverage for compliance oversight across affiliates, markets, products, and
instrument types
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Established out-of-the-box detection scenarios to support business and regulatory needs
unique to energy trading markets
Built upon a proven core risk platform, enabling end-to-end case and workflow management,
investigation, audit, and reporting capabilities
New regulatory standards associated with energy trading set by the CFTC, FERC, FTC,
and ACER are placing increased pressure on energy trading firms to demonstrate
adequate procedures, processes, and controls to detect and prevent prohibited
activities. Actimize helps firms efficiently meet the needs of regulators, avoid fines,
disgorgement, and civil penalties
Vendor – NICE Systems
http://www.niceactimize.com
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About The Authors This report has been compiled and issued by ComTech Advisory in association with ETR Advisory and
sponsored by TriOptima.
Aviv Handler Mr. Handler is the Managing Director of ETR Advisory, a specialist consulting company focused
entirely on Energy Trading regulation. He specializes in energy regulation and the IT systems and
platforms required for compliance. He gained this after spending several years in the field, setting up
the European Compliance Centre of Excellence at SunGard prior to founding ETR. He has also been
involved in banking regulation.
He has 20 years of experience in energy trading, credit, risk and financial technology. He has
delivered a series of trading, credit and risk solutions to a wide variety of oil majors, power and gas
companies and investment banks.
The last 12 years have been focused on the commodity trading markets, the majority of which was
spent running Coherence Consulting, which specialized in credit risk within the energy markets as
well as CTRM systems and implementations and compliance. Coherence’s team delivered a number
of solutions to a variety of global and local clients under his leadership, spanning oil majors, gas and
power trading companies and CTRM software houses. Coherence was ultimately absorbed by Sirius
Solutions, where he ran the European region.
Prior to forming his business, Mr. Handler led product strategy for KWI, an ETRM vendor whose
system, KW 3000, was widely used in Europe and North America.
Mr. Handler also spent several years in capital markets technology, specializing in compliance, risk
and financial messaging. He was one of the original members of the FpML initiative, a standard that
is now in scope for Energy regulation alongside others such as CpML.
Mr. Handler speaks regularly at conferences, and has written a large number of articles on
regulation, credit and commodity trading, as well as financial messaging. His blog at
http://www.energytradingregulation.com is being increasingly used as a primary resource for
information about the state of the regulation space.
Mr. Handler holds a degree in computer science from Imperial College, University of London.
Dr. Gary M. Vasey
Dr. Vasey is an industry expert noted for his analysis, consulting, marketing, and branding skills. With
over 29-years’ experience in the energy and commodities trading industry, Gary has experienced the
industry’s volatility as an executive of a trading firm, geologist, consultant, software developer,
analyst, and marketing practitioner, providing him with unique insights, not just into the entire value
chain, but also into how to position, brand, and deliver products and services to the industry.
He is a noted expert on the commodity trading, transaction and risk management software industry
and an accomplished industry analyst and thought leader.
Gary has published more than 200 articles on energy and commodities industry trends in a variety of
publications, is a regular speaker at industry conferences, and is the co-author of the books Trends in
European Energy Market Regulations
© Commodity Technology Advisory LLC and ETR Advisory Ltd, 2013, All Rights Reserved. 51
Energy Trading, Transaction and Risk Management Software – A Primer and Selecting and
Implementing ETRM Software – A Primer (with Patrick Reames). He also contributed two chapters to
The Professional Risk Managers‘ Guide to Energy and Environmental Markets published by PRMIA
and two chapters, co-written with Peter C. Fusaro, to Weather, Energy and Environmental Hedging –
An Introduction (ICFAI University Press, 2007) edited by Amando F C Da Silva.
Gary is also the co-author of Energy & Environmental Hedge Funds – The New Investment Paradigm
(Wiley, 2006) with Peter C. Fusaro, and of many trade press articles on hedge funds in the energy,
commodities and environmental industry.
Gary holds a B.Sc. (Hons.) degree in Geological Sciences from the University of Aston in Birmingham,
England and a Ph.D. in Geology from the University of Strathclyde, Scotland.
ComTech Advisory
Commodity Technology Advisory is the leading analyst organization covering the ETRM and CTRM
markets. We provide the invaluable insights into the issues and trends affecting the users and
providers of the technologies that are crucial for success in the constantly evolving global
commodities markets.
Patrick Reames and Gary Vasey head our team, who’s combined 60-plus years in the energy and
commodities markets, provides depth of understanding of the market and its issues that is
unmatched and unrivaled by any analyst group. For more information, please visit
http://www.comtechadvisory.com.
ComTech Advisory also hosts the CTRMCenter, your online portal with news and views about
commodity markets and technology as well as a comprehensive online directory of software and
services. Please visit the CTRMCenter at http://www.ctrmcenter.com.
ETR Advisory
ETR (Energy Trading Regulation) Advisory Ltd is a specialized, expert resource, which explains, and
helps apply the complex labyrinth of European Energy and Commodity Market regulations, including
EMIR, REMIT and MiFID II. Our detailed knowledge of the rules and the technology platforms and
solutions around them permits us to help our clients navigate and implement the best solutions
while being ready for future rules.
Since being founded in May 2013, ETR has already advised several Market Participants, ETRM
companies and trading platforms. ETR has also provided training to several companies.
ETR also runs the blog at www.energytradingregulation.com, which provides news and thoughts
about developments in the regulatory field in one place.
European Energy Market Regulations
© Commodity Technology Advisory LLC and ETR Advisory Ltd, 2013, All Rights Reserved. 52
About the Sponsor
TriOptima TriOptima is the award-winning provider of post trade risk management services and infrastructure
for OTC derivatives. Focused on reducing costs, eliminating operational and credit risk, improving
counterparty exposure management, and reducing systemic risk, TriOptima offers a range of
services: triReduce to reduce swap inventory and counterparty risk; triResolve to reconcile OTC
derivative portfolios and manage disputes; triBalance to manage cleared and bilateral counterparty
risk; and triQuantify to measure and analyze counterparty risk. Currently triBalance and triQuantify
are in the piloting phase and are targeted for launch by early 2014.
triReduce, TriOptima’s portfolio compression service, eliminates credit risk and reduces operational
and capital costs. Eliminating derivatives exposures and shrinking the balance sheet is critically
important in anticipation of Basel III gross leverage ratio guidelines. Derivatives are measured on a
gross, not net basis, inflating balance sheets significantly. Moreover, compression eliminates gross
notional value, and with the EUR 3 billion clearing threshold in EMIR, it has become extremely
important for commodity trading companies to proactively manage their gross notional exposure.
Serving over 150 institutions worldwide including major energy houses and dealer banks, triReduce
offers compression cycles in a range of commodity derivatives, interest rate swaps and credit default
swaps. triReduce has terminated $354 trillion in notional principal outstanding across product
classes since its introduction in 2003 through August 2013.
TriOptima has gone from a pilot phase in 2011 to running 6 live cycles in the commodity space in the
past year, including natural gas, power, oil, coal and precious metals. Over 24 commodities houses
and dealer banks have participated with several more completing documentation in preparation of
the upcoming cycles. More than $14 Billion in notional principal has been eliminated for
commodities transactions.
triResolve, TriOptima’s portfolio reconciliation and counterparty exposure management service, is
used by over 450 institutions to reconcile their OTC derivative portfolios, the majority on a daily
basis. With over 8 million transactions on triResolve (90% of collateralized OTC derivative
transactions plus uncollateralized OTC derivatives, cleared trades and other types of trades), most
reconciliations are done daily in order to comply with the new portfolio reconciliation standards that
will be effective under the CFTC (August 23) and ESMA (September 15) rules in 2013.
New institutions are joining triResolve daily around the world, over the past 12 months over 250
new firms have started to use triResolve, an increase of more than 100% over the previous 12
months. The number of reconciliations grew to 116,000 a month in July 2013. Energy firms, Asian
financial institutions and mid-tier European firms are among the growing number using triResolve.
Enhancements to the basic triResolve platform incorporated and standardized data categories
critical to commodity participants. Currently over 450,000 commodity trades are being reconciled on
triResolve. Adoption of the triResolve service accelerated dramatically in the past year in order to
meet the regulatory deadlines for portfolio reconciliation in the US (August 23) and Europe
(September 15). During the past year, triResolve has been adopted by the commodity trading
community as the industry-wide solution for portfolio reconciliation. As of end of August 2013, over
70 leading energy houses and financial institutions use the triResolve service for reconciliation of
commodity trades.
European Energy Market Regulations
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triResolve is a network service that does not involve any software installation or updates. In fact,
triResolve revolutionized reconciliation practice from a reactive, spreadsheet-based internal
operation to a proactive, secure web service. Clients upload their data against their counterparties
onto the triResolve website, and the results of the reconciliation are available on the website.
All types of OTC derivative transactions (IRS, equity, CDS, FX, Commodities, etc.) and all product
structures (plain vanilla to bespoke) are accommodated in triResolve. There are no data format
requirements; triResolve normalizes the data that each institution submits. Matching information is
available to users at the portfolio level or at the individual transaction level. Users can communicate
on the triResolve platform both internally with other departments in their institution or externally
with their counterparties to investigate differences. triResolve’s advanced analytics and reporting
functionality allow users to drill down to any level of the data in multiple dimensions and produce
reports targeted to the needs of any audience from the most senior credit officer to the head of
collateral management.
During the last year, triResolve users have expanded the application of triResolve’s reconciliation
functionality to trades beyond the collateralized OTC derivative transactions initially
included. Uncollateralized OTC trades, cleared transactions, exchange-traded transactions,
securities lending trades and repo trades are also reconciled on triResolve in response to the need
for greater precision in counterparty credit risk management. Emphasizing the versatility and
adaptability of the service, triResolve clients also reconcile their collateral positions.
Most recently (June 2013), TriOptima and DTCC announced the DTCC trade repository will make
client data available to TriOptima to support data verification and portfolio reconciliation of trade
repository data. TriOptima will be the first service provider to directly receive DTCC repository data
for this purpose underscoring TriOptima’s commitment to interoperability and innovation in a
changing marketplace. Interested in establishing connectivity to additional repositories, TriOptima
also announced that it will connect to REGIS-TR when it goes live in January 2014 under EMIR rules
for transaction reporting.
TriOptima, an ICAP Group company, maintains offices in London, New York, Singapore, Stockholm,
and Tokyo.