• ESMA and EMIR

    The European Securities and Markets Authority (ESMA) is a EU financial regulatory institution and European Supervisory Authority which was set up with the aim of enforcing regulation in financial market across EU. It works in the fields of securities regulation to improve the stability and functioning of the European Union Financial Market and increase competition among all the financial players.

    ESMA replaced the Committee of European Securities Regulators (CESR) on 1st January 2011 and it is one of the three new European Supervisory Authorities (ESAs) set up within the European System of Financial Supervisors.

    European Market Infrastructure Regulation (EMIR) is a European Union regulation designed to increase the stability of the over-the-counter (OTC) derivative markets throughout the European Union states just like Dodd-Frank act for USA. EMIR is the regulation part proposed by ESMA in order to bring more transparency and regulation in the OTC derivatives market.
    The main obligations under EMIR are:

    1. EMIR mandates Central Clearing for certain OTC derivatives product
    2. Trade reporting to trade repositories. EMIR puts emphasis on dual-side reporting which means both the parties are expected to report the same trade details to the regulator. Once trades details are available from both the parties, then the trade details are matched with each other using unique identifier UTI
    3. CFTC proposes a unique identifier also known as UTI (Unique Trade Identifier) for all trade reporting to identify the position/trade uniquely – this is same as USI used for CFTC/USA
    4. For the case of delegated reporting, Party 2 can delegate reporting responsibility to Party 1 or vice versa. In that case, one party can report on behalf of both of them (one is self-reporting and another is delegated reporting)
    5. EMIR does not require real time transaction reporting. Only snapshot reporting before T+1 is sufficient for EMIR.
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