From Complexity to Clarity: ESMA’s Roadmap to Simpler Transaction Reporting
ESMA has set a new direction for EU transaction reporting. Its latest recommendations provide a practical roadmap towards a simpler, more integrated reporting framework. Here’s what it means for firms. On 23 June 2025, the European Securities and Markets Authority (ESMA) launched its Call for Evidence on simplifying financial transaction reporting, inviting industry feedback on streamlining reporting across MiFIR, EMIR and SFTR. Following extensive industry engagement, ESMA published its Final Report on 2 July 2026, setting out its preferred approach and a practical roadmap for implementation. Rather than focusing solely on reducing reporting burdens, ESMA has outlined a blueprint for a more integrated, efficient and data-driven reporting ecosystem. The Future of Transaction Reporting ESMA’s preferred long-term solution, Option 2a, proposes a fully integrated reporting model across MiFIR, EMIR and SFTR. The objective is straightforward: replace fragmented reporting processes with a framework that enables information to be submitted once and reused wherever appropriate, reducing duplication while preserving the quality and value of regulatory data. Importantly, simplification is not about reducing regulatory oversight. It is about improving consistency, enabling greater automation and making reporting more efficient for firms and supervisors alike. Immediate Relief, Long-Term Reform Recognising that full implementation will take time, ESMA has also proposed a package of short- and medium-term measures designed to reduce operational burden while laying the foundations for long-term reform. These include: Removing or deprioritising reporting fields with limited supervisory value. Expanding delegated reporting arrangements. Improving consistency across reporting requirements. Simplifying reporting processes while maintaining robust data quality. Together, these measures demonstrate ESMA’s commitment to delivering practical benefits ahead of the longer-term reforms. A More Integrated Reporting Landscape Perhaps the most significant proposal is the move towards a single reporting channel, replacing today’s fragmented reporting landscape with a more integrated and efficient model. For firms, the benefits include: Reduced duplication across reporting regimes. Simpler reporting processes. Common reporting standards and consistent data definitions. Greater automation and straight-through processing. Higher-quality regulatory data. Lower operational complexity and reporting costs. Ultimately, the objective is to make reporting simpler for firms while ensuring supervisors continue to receive consistent, high-quality information. A Clear Roadmap Unlike the original Call for Evidence, the Final Report sets out an indicative implementation roadmap. Subject to the necessary Level 1 legislative changes, ESMA envisages: Mid-2028 – Governance arrangements established to support implementation. Mid-2029 – Completion of the integrated Level 2 reporting template. H2 2031 – Delivery of the integrated reporting model, allowing approximately 12–18 months for firms to prepare. While these milestones remain dependent on the legislative process, they provide the clearest indication yet that ESMA has moved from consultation to a structured implementation roadmap. Looking Ahead ESMA’s Final Report marks an important milestone in the evolution of EU transaction reporting. By combining immediate burden reduction measures with a clear long-term vision, ESMA has provided firms with greater certainty about the future direction of reporting. For firms, the message is clear: now is the time to streamline reporting processes, strengthen data governance and prepare for a more efficient, technology-enabled reporting environment. How Complyport Can Help As the regulatory reporting landscape continues to evolve, firms need technology that not only meets today’s requirements but is also designed to adapt to tomorrow’s regulatory changes. Complyport, through its award-winning RegTech platform, MAP FinTech, helps firms simplify regulatory reporting by providing a centralised platform that supports multiple reporting regimes and jurisdictions. MAP FinTech validates, enriches, transforms and routes data to regulators, Trade Repositories and Approved Reporting Mechanisms (ARMs), helping firms improve data quality, reduce operational complexity and respond efficiently to evolving regulatory requirements. ESMA’s vision of greater harmonisation, reusable data and more integrated reporting closely aligns with the principles on which MAP FinTech has been built. By consolidating reporting processes within a single, scalable platform, firms can strengthen operational resilience today while preparing for the future of EU transaction reporting. Whether you are looking to optimise existing reporting processes or prepare for the next generation of reporting requirements, Complyport combines deep regulatory expertise with proven RegTech solutions to support your compliance journey. If you have any questions about ESMA’s proposed reforms or the future of the EU transaction reporting framework, please contact our team.
Regulatory Reporting: From Compliance Obligation to Strategic Advantage
For many years, regulatory reporting was viewed primarily as a compliance exercise or a necessary process to satisfy regulatory requirements and avoid potential sanctions. While accuracy and timely submissions remain essential, the role of regulatory reporting has evolved significantly. Today’s regulatory environment is more complex than ever. Firms face increasing reporting obligations, growing data volumes and heightened regulatory scrutiny. At the same time, senior management teams are seeking greater visibility into risks, operations and business performance. As a result, organisations are beginning to recognise that regulatory reporting can deliver value far beyond compliance. The Strategic Value of Reporting Data Regulatory reporting requires firms to collect, validate and analyse large volumes of information relating to their activities, transactions and exposures. When managed effectively, this data can provide valuable insights that support decision-making across the organisation. Reporting data can help firms: Strengthen risk management and oversight Improve governance and accountability Enhance operational transparency Identify inefficiencies and control gaps Support strategic planning and growth initiatives Rather than existing solely to satisfy regulatory requirements, reporting frameworks can become an important source of business intelligence. Common Challenges Facing Reporting Teams Despite significant investment in reporting processes, many organisations continue to face operational challenges that limit the value of their reporting activities. Fragmented Data Sources: Data is often spread across multiple systems, departments and business functions. This can create inconsistencies, increase reconciliation efforts and make it difficult to establish a single source of truth. Manual Processes: Many reporting teams still rely heavily on spreadsheets and manual controls. While these approaches may work in the short term, they can become increasingly difficult to manage as reporting obligations expand. Data Quality Concerns: Inaccurate or incomplete data can lead to reporting errors, increased remediation efforts and greater regulatory scrutiny. Maintaining confidence in reporting outputs requires robust controls throughout the reporting lifecycle. Limited Visibility: Without effective monitoring and oversight, organisations may struggle to identify issues early, assess reporting performance or extract meaningful insights from reporting data. Building a More Effective Reporting Framework To unlock the full value of regulatory reporting, firms should consider a more integrated and strategic approach. Key areas of focus include: Data Governance: Establishing clear ownership, accountability and controls over reporting data helps improve consistency and reliability. Automation: Automating reporting processes can reduce manual effort, minimise operational risk and improve scalability as regulatory requirements evolve. Monitoring and Oversight: Continuous monitoring enables firms to identify issues quickly, track performance and strengthen confidence in reporting outcomes. Collaboration Across Functions: Regulatory reporting should not be viewed solely as a compliance responsibility. Effective reporting requires collaboration between compliance, operations, risk, technology and senior management teams. Looking Ahead Regulatory reporting will continue to play a critical role in helping organisations meet their obligations and maintain regulatory confidence. However, the firms that derive the greatest value from reporting will be those that view it as more than a compliance requirement. By investing in robust governance, high-quality data and modern technology solutions, organisations can transform regulatory reporting into a strategic capability that supports stronger decision-making, improved efficiency and long-term resilience. How Complyport Can Help MAP FinTech, a RegTech platform by Complyport, helps organisations manage complex regulatory reporting obligations through a single, centralised platform. Supporting multiple reporting regimes and jurisdictions, the platform enables firms to automate key processes, improve data quality and strengthen oversight across the reporting lifecycle. To learn more about MAP FinTech, contact our team for a demo.
Complyport Tech’s feedback to ESMA’s Call for Evidence
As we have mentioned in a previous blog post, ESMA has issued a call for evidence for the Simplification of Financial Transaction Reporting. Complyport Tech has carefully studied ESMA’s proposals and has replied to the call for evidence. In the spirit of alleviating our clients from duplicative reporting , streamlining reporting regimes and achieving maximum harmonisation with other financial centres, our proposals to ESMA can be summed as follows: Report Once principle: A single report, for all reporting obligations under Art.9 of EMIR (to TRs), Art 26 (to ARMs or NCAs), Art. 6,10,20 and 21 (APA) of MiFIR and Art.4 of SFTR. Harmonised reporting template for the Reporting Once principle. Extension of the deadlines to report under Art. 26 of MiFIR, Art.9 of EMIR and Art.4 of SFTR to T+2. Abolish dual sided reports. Exemptions from reporting for small Financial Counterparties (e.g. Investment Firms, Funds, etc.) on the basis of operational complexity, size, exposures etc. (small buy-side Firms). Exclude ETDs from post trade events reporting, i.e. no valuation or collateral updates for Exchange Traded Derivatives ( Exchange Traded Derivative has the same meaning as EMIR). Read our feedback here. Disclaimer: This blog was written by Complyport Tech’s Market Infrastructure Team and under no circumstance does it replace advice or guidance by Firms’ compliance and/or risk management functions. Firms affected by the topics discussed in this blog should consult with their compliance/risk management personnel and or consultants for specific guidance and must not rely on the information contained herein. Contact our team of experts for more information or any assistance you may require.
The FX Swaps conundrum for multi-jurisdictional firms.
Major financial centres from across the world are harmonising their derivatives reporting requirements in accordance with IOSCO’s CPMI technical guidance on critical OTC derivatives data elements (other than the UTI and the UPI), the CDE. Australia, Singapore the UK, the EU went live with their implementation of the CDE in 2024, while Canada has done so in 2025. As these jurisdictions harmonised their data reporting requirements, there was hope that similar products traded across jurisdictions would be reported in much the same way. This however has not come to pass and nowhere is this more evident than in the case of physically settled FX Swaps. Physically settled FX Swaps – A primer In very broad strokes a FX swap is exactly what it says on the tin. 2 parties agree to exchange (swap) a specific amount of currencies, at specific prices in the future. These swaps come in 2 flavours: The Spot – Forward Swap Counterparty A exchanges X amount of Euros for Y amount of USD with Counterparty B at the spot market price with the spot leg (or near leg) of the trade settling within 2 business days, while Counterparty A will receive back its Euros and Counterparty B its USD at a predefined price sometime in the future (the forward leg or second leg). Leg Counterparty A side Counterparty B Side Price Settlement Date Spot (first leg) Pays EUR Receives USD Pays USD Receives EUR Spot Market Within 2 business days Forward(second leg) Pays USD Receives EUR Pays USD Receives EUR Forward Price 1 Future date 1 The Forward – Forward Swap As before, Counterparty A exchanges X amount of Euros for Y amount of USD, but this time price is a predefined forward price, and the first leg settles in the future (beyond the 2 business days threshold). The second leg unwinds the first leg and is itself executed in the future (usually at a later date than the first leg) and at a price different than the price for the first leg. Leg Counterparty A side Counterparty B Side Price Settlement Date Forward 1 (first leg) Pays EUR Receives USD Pays USD Receives EUR Forward Price 1 Future date 1 Forward 2 (second leg) Pays USD Receives EUR Pays EUR Receives USD Forward Price 2 Future date 2 Reporting requirement across jurisdictions EU and the UK Both the EU and the UK require that an FX Swap (either Spot – Forward or Forward – Forward) be reported in a single line as explained by ESMA in their Guidelines for EMIR REFIT reporting and by the FCA when the Authority adopted an ESMA Q&A. The representation is as follows for Swaps (either Spot-Forward or Forward-Forward) [table id=12 /] Australia In Australia in accordance with ASIC Derivative Transaction Rules (Reporting) 2024 and associated technical guidance, an FX Swap is reported as 2 reports, one for the near leg and another for the far leg, linking the 2 reports using the Package Identifier elements. As such, reporting entities need to submit 2 reports for a FX Swap (one for the near leg and another for the far leg), see below a representation for a Forward-Forward Swap report for ASIC. [table id=Australia /] *Swap points are calculated as the rate of the far leg minus the rate of the near leg. Swap points can be a negative or positive number. Singapore MAS in its FAQs on reporting has taken yet another approach. MAS emulates the 2-line reporting approach as Australia, however, it adds its own twist. Where Counterparties are mandated to report each leg of the swap separately (be it a spot-forward or a forward-forward) the 2 legs need to be linked with the swap-link field (unique for MAS) while as per MAS FAQs the package identifier field should be populated to identify other types of packaged trades to connect two or more derivatives contracts that are negotiated together under a single economic agreement (e.g. a swaption) but are reported separately. Number of Reports Reporting Counterparty Contract Type Direction of Leg1 Direction Leg2 Exchange Rate (in Singapore doubles as the forward exchange rate) Swap Link Unique Product ID Package Identifier 1 Counterparty A Swap Payer Receiver Forward Rate1 ABCD UPI-B 2 Counterparty A Swap Receiver Payer Forward Rate2 ABCD UPI-B 1 Counterparty B Swap Receiver Payer Forward Rate1 1234 UPI-B 2 Counterparty B Swap Payer Receiver Forward Rate2 1234 UPI-B Canada The Canadian implementation of the CDE as per the CSA Technical Manual is closely aligned with the USA’s CFTC implementation of the CDE. In the US implementation, FX Swaps are reported in 2 separate transactions linked with the Package Identifier fields (similar to Australia). As such, we can readily assume that, in the absence of additional guidance by the CSA’s, reporting entities in Canada will report FX Swaps much like the same way as Australia see representation of a Forward-Forward Swap report below. Number of Reports Reporting Counterparty Contract Type Direction of Leg1 Direction Leg2 Exchange Rate (in Canada doubles as the forward exchange ratee) Unique Product ID Package Identifier Package Spread 1 Counterparty A Swap Payer Receiver Forward Rate 1 UPI-B ID123 Swap points* 2 Counterparty A Swap Receiver Payer Forward Rate 2 UPI-B ID123 Swap points* 1 Counterparty B Swap Receiver Payer Forward Rate 1 UPI-B IDABC Swap points* 2 Counterparty B Swap Payer Receiver Forward Rate 2 UPI-B IDABC Swap points* Additional issues – The UPI problem As we’ve seen in the previous sections, all jurisdictions require reporting counterparties to report FX Swaps (either Spot-Forwards or Forward – Forwards) with their own distinct UPI that characterises the Swap. Much to the reporting parties dismay ANNA DSB specs do not currently allow reporting parties to generate UPIs for the specific case of a Spot-Forward Swap as the UPI is limited to the generation of Forward-Forward Swaps. As such, given that the overwhelming majority of FX Swaps traded are not listed on Exchange, they require to be reported with a
Streamlining EU’s EMIR – MiFIR – SFTR reporting, ESMA call for evidence
Introduction On the 23rd of June 2025 ESMA issued a call for evidence “On a comprehensive approach for the simplification of financial transaction reporting”. ESMA requests input from interested stakeholders on its proposals for eliminating inefficiencies duplications and other such encumbrances that emanate from disparate reporting rules such as EMIR, MiFIR, SFTR. Transaction reporting under the aforesaid regimes, cost reporting entities between 1- 4 billion EUR per year, as per a 2019 study by the EU Commission. As the focus of the EU Commission has shifted towards simplifying and streamlining rules across the board, the Commission in January 2025 has set as its goal to reduce reporting burden for all companies across the board . Aligning with the Commission’s goals ESMA considered 2 thematic categories for the simplification of reporting and for each thematic category, ESMA presented 2 reporting options. It should be noted that for both options ESMA considers important to: Preserve information scope, Decrease reporting overlap, Ensure alignment with global reporting standards, Balance Cost and Burden. To wit, while ESMA acknowledges that reporting regimes (SFTR, MiFIR, EMIR and others) serve different purposes e.g. MiFIR reporting provides NCA’s with a view of market activities and assists in the detection of instances of Market Abuse, EMIR provides a measure of risk buildup (especially counterparty default risk) as well as insights on how that risk is managed (clearing, collateral exchanges, risk reduction exercises etc.) and are triggered by different events there is substantial overlap between them in terms of information provided. Option 1- Removal of Duplications For this option ESMA is suggesting 2 different approaches to reducing reporting burden. Delineation by Instrument Type As most reporting entities are aware, in the EU (and the UK) derivatives reporting also captures derivatives listed on Regulated Markets and OTC derivatives. In other jurisdictions such as Canada, Australia and Singapore, only OTC derivatives are captured by the aforesaid obligation. As such for this proposal, ESMA is considering limiting the perimeter of EMIR reporting for OTC derivatives only. Currently an ETD listed on e.g. Eurex is doubly reported under both EMIR and MiFIR. ESMA is asking for feedback whether transaction reporting of such ETDs could be carried out under MiFIR only, while post-transaction events (valuations/collateral) for ETDs should be sourced from the Clearing Houses (CCPs) of the Regulated Market where the ETD was executed. In such a case OTC derivatives remain unaffected. Similarly, SFTR obligations are also unaffected. Delineation by Events ESMA is proposing to report all transactions (whether EMIR, MiFIR, SFTR) under MiFIR while post trade events such as valuations, collateral updates etc would be EMIR reportable (for derivative trades) and SFTR (for SFT trades). This implies that all new transactions whether they are on bonds, shares, margin lending, repos, CFDs, forwards, swaps etc. would be reported as new trades under MiFIR, while Valuation Updates, Collateral Updates, Novation events, Compressions, etc. would be reported under EMIR (for derivatives). SFTR reporting (similar to EMIR) will only be focusing on post trade events (e.g. valuation, margin updates etc.). Option 2- Report Once Principle ESMA is considering the creation of a unified reporting template i.e. collapse all reporting obligations into a single report reported via a unified channel. For this option ESMA is proposing 2 (very similar) approaches, one is to collapse EMIR/MiFIR/SFTR into a single report, while the other approach includes a scenario whereby non-ESMA reporting (i.e. reports not under ESMA’s mandate) could be included in the unified template e.g. Energy reporting REMIT (currently under ACER’s mandate) or Solvency II reporting (EIOPA). Of the 2 options (each with 2 approaches), ESMA recognises that the Report once Principle would be the most cost effective in terms of reducing the overall reporting burden. Nevertheless, ESMA also acknowledges that such a radical approach may incur additional costs for affected parties as they would need to reconfigure reporting processes, including investing in IT, training staff, merging siloed data and so on. Moreover, the Authority further acknowledges that such an approach may require substantial amendments to legal texts and time till it is finally implemented. Other Issues Dual Sided Reporting For both options ESMA is asking for input on the possible revision of the dual sided reports, i.e. where both counterparties to a trade/SFT will need to report and reconcile said reports. ESMA acknowledges that if the requirement for dual-sided reporting is abolished NCAs may need to take additional steps to dispense their supervisory duties, such as performing full audits on firms. Reporting at Position Level For a few of the proposals ESMA is also suggesting abolishing the allowance for position level reporting (applicable for EMIR/SFTR but not for MiFIR) and, instead, the position is calculated based off the transaction reports. ESMA acknowledges that such a move may be difficult given that for ETDs as well as some OTC derivatives and some SFTs risk, collateral, valuations are always calculated at a position level. Next Steps ESMA will consider feedback/input it receives by 19 September 2025 and expects to publish at the beginning of 2026 a final report, outlining the key areas and the preferred simplification option/approach. ESMA has further indicated that it will not put forward any new suggestions for changes to MiFIR transaction reporting for which it has consulted in 2024 (refer to our blog here for an overview) pending the outcomes of this Call of Evidence. ESMA has nonetheless produced a final report on the issue in which they record respondents’ preferences and comments (Complyport Tech participated in that consultation). As ESMA notes, irrespective the outcome of this exercise it will be years before any changes come into effect. Characteristically for option 1 (which is the easiest of the 2 to implement) ESMA expects that implementation timeframes would be approximately up to 5 years. Complyport Tech, in the spirit of assisting its clients to comply with their reporting obligations accurately and with cost efficiency, intends to constructively participate in the Call for Evidence.
Streamlining EU’s EMIR – MiFIR – SFTR reporting, ESMA call for evidence
Introduction On the 23rd of June 2025 ESMA issued a call for evidence “On a comprehensive approach for the simplification of financial transaction reporting”. ESMA requests input from interested stakeholders on its proposals for eliminating inefficiencies duplications and other such encumbrances that emanate from disparate reporting rules such as EMIR, MiFIR, SFTR. Transaction reporting under the aforesaid regimes, cost reporting entities between 1- 4 billion EUR per year, as per a 2019 study by the EU Commission. As the focus of the EU Commission has shifted towards simplifying and streamlining rules across the board, the Commission in January 2025 has set as its goal to reduce reporting burden for all companies across the board . Aligning with the Commission’s goals ESMA considered 2 thematic categories for the simplification of reporting and for each thematic category, ESMA presented 2 reporting options. It should be noted that for both options ESMA considers important to: Preserve information scope, Decrease reporting overlap, Ensure alignment with global reporting standards, Balance Cost and Burden. To wit, while ESMA acknowledges that reporting regimes (SFTR, MiFIR, EMIR and others) serve different purposes e.g. MiFIR reporting provides NCA’s with a view of market activities and assists in the detection of instances of Market Abuse, EMIR provides a measure of risk buildup (especially counterparty default risk) as well as insights on how that risk is managed (clearing, collateral exchanges, risk reduction exercises etc.) and are triggered by different events there is substantial overlap between them in terms of information provided. Option 1- Removal of Duplications For this option ESMA is suggesting 2 different approaches to reducing reporting burden. Delineation by Instrument Type As most reporting entities are aware, in the EU (and the UK) derivatives reporting also captures derivatives listed on Regulated Markets and OTC derivatives. In other jurisdictions such as Canada, Australia and Singapore, only OTC derivatives are captured by the aforesaid obligation. As such for this proposal, ESMA is considering limiting the perimeter of EMIR reporting for OTC derivatives only. Currently an ETD listed on e.g. Eurex is doubly reported under both EMIR and MiFIR. ESMA is asking for feedback whether transaction reporting of such ETDs could be carried out under MiFIR only, while post-transaction events (valuations/collateral) for ETDs should be sourced from the Clearing Houses (CCPs) of the Regulated Market where the ETD was executed. In such a case OTC derivatives remain unaffected. Similarly, SFTR obligations are also unaffected. Delineation by Events ESMA is proposing to report all transactions (whether EMIR, MiFIR, SFTR) under MiFIR while post trade events such as valuations, collateral updates etc would be EMIR reportable (for derivative trades) and SFTR (for SFT trades). This implies that all new transactions whether they are on bonds, shares, margin lending, repos, CFDs, forwards, swaps etc. would be reported as new trades under MiFIR, while Valuation Updates, Collateral Updates, Novation events, Compressions, etc. would be reported under EMIR (for derivatives). SFTR reporting (similar to EMIR) will only be focusing on post trade events (e.g. valuation, margin updates etc.). Option 2- Report Once Principle ESMA is considering the creation of a unified reporting template i.e. collapse all reporting obligations into a single report reported via a unified channel. For this option ESMA is proposing 2 (very similar) approaches, one is to collapse EMIR/MiFIR/SFTR into a single report, while the other approach includes a scenario whereby non-ESMA reporting (i.e. reports not under ESMA’s mandate) could be included in the unified template e.g. Energy reporting REMIT (currently under ACER’s mandate) or Solvency II reporting (EIOPA). Of the 2 options (each with 2 approaches), ESMA recognises that the Report once Principle would be the most cost effective in terms of reducing the overall reporting burden. Nevertheless, ESMA also acknowledges that such a radical approach may incur additional costs for affected parties as they would need to reconfigure reporting processes, including investing in IT, training staff, merging siloed data and so on. Moreover, the Authority further acknowledges that such an approach may require substantial amendments to legal texts and time till it is finally implemented. Other Issues Dual Sided Reporting For both options ESMA is asking for input on the possible revision of the dual sided reports, i.e. where both counterparties to a trade/SFT will need to report and reconcile said reports. ESMA acknowledges that if the requirement for dual-sided reporting is abolished NCAs may need to take additional steps to dispense their supervisory duties, such as performing full audits on firms. Reporting at Position Level For a few of the proposals ESMA is also suggesting abolishing the allowance for position level reporting (applicable for EMIR/SFTR but not for MiFIR) and, instead, the position is calculated based off the transaction reports. ESMA acknowledges that such a move may be difficult given that for ETDs as well as some OTC derivatives and some SFTs risk, collateral, valuations are always calculated at a position level. Next Steps ESMA will consider feedback/input it receives by 19 September 2025 and expects to publish at the beginning of 2026 a final report, outlining the key areas and the preferred simplification option/approach. ESMA has further indicated that it will not put forward any new suggestions for changes to MiFIR transaction reporting for which it has consulted in 2024 (refer to our blog here for an overview) pending the outcomes of this Call of Evidence. ESMA has nonetheless produced a final report on the issue in which they record respondents’ preferences and comments (MAP FinTech participated in that consultation). As ESMA notes, irrespective the outcome of this exercise it will be years before any changes come into effect. Characteristically for option 1 (which is the easiest of the 2 to implement) ESMA expects that implementation timeframes would be approximately up to 5 years. Complyport Tech, in the spirit of assisting its clients to comply with their reporting obligations accurately and with cost efficiency, intends to constructively participate in the Call for Evidence.
Crypto assets: An overview of transaction reporting obligations under securities laws
On January 3rd 2009 the Bitcoin network came into existence with the elusive Satoshi Nakamoto mining the so called genesis block of bitcoin (block number 0) which had a reward of 50 bitcoins. Initially brushed off as another iteration of E-Gold, a rather popular digital currency from the internet’s early years that was shut down by US authorities, Bitcoin was not seriously considered as a viable asset. Bitcoin however, and the multitude of other crypto assets launched since, followed a different trajectory. Now, Investment Firms, Funds and other financial intermediaries allow their clients to invest in crypto assets. In this blog we will explore reporting obligations of such firms that emanate from trading cryptos. Definitions It is prudent to flesh out a few terms associated with the crypto-space which are relevant to the issue of transaction reporting obligations. Distributed Ledger Technologies (DLT) A decentralised database which is managed/distributed by various participants. There is no central authority to act as the administrator, with the ability to unilaterally make changes to the database without other participants accepting or condoning. As this database is distributed to all participants it may allow for greater transparency making the entire system more resilient to manipulation by bad actors. Blockchain A specific type of Distributed Ledger Technology that organises data into blocks, each block is closed and opened with a specific cryptographic signature called hash. This signature verifies that the data contained within the block have not been manipulated and seals them from further alterations. I.e. once data have been recorded into a blockchain they cannot be undone. Take home message, all blockchains are DLTs, but not all DLTs are blockchains. Crypto-Coins/Currencies A coin is created with the so-called mining process whereby a block is added on a blockchain (see above), the process of creating a block involves solving a cryptographic puzzle which increases in complexity as more blocks are added to the chain. This increase in complexity requires vast amounts of computing power. A lot of participants attempt to solve the puzzle, the first to get to the solution adds another block to the chain and is rewarded with a coin, which can then be traded with other participants. A key characteristic of this coin is that it can only exist on its native blockchain and cannot be used on other DLTs as is. I.e. Bitcoin/DOGE can only be mined on their native blockchain and cannot be traded on e.g. Ethereum’s blockchain as is. Crypto Tokens Tokens are created on an existing DLT that allows such programmability, e.g. Ethereum blockchain allows for the creation of such tokens, but Bitcoin’s blockchain does not facilitate this. Usually such tokens are pre-mined, i.e. the developer decides how many tokens they intend to create and distribute them to interested parties. In this case the mining process described for Crypto coins does not apply. Moreover, and more importantly, tokens may be coded with different functions (unlike coins) and can exist across different DLTs (e.g. a Token can exist on both Ethereum’s and Solana’s blockchains). Examples of tokens include Tether and NFTs. Tokenisation In layman’s terms, it’s the process of representing an asset in digital form. E.g. a title deed of a property, ownership of a car, or more relevant to the topic at hand, a financial instrument. The token is recorded on a programmable DLT which can then be traded across participants. Tokenisation promises to deliver reduced trading costs, reduction of counterparty risk and peer to peer trading. In a traditional exchange when trading e.g. shares, once execution is triggered, the order is processed by different functions within the exchange, such as e.g. the Central Clearing House that interposes between buyer and seller in order to verify that they have the monies and the assets to trade, the Central Securities Depositary that registers the change in ownership of the asset etc. Such functions may be rendered redundant if trading is done using a DLT. In fact several exchanges have launched DLT trading platforms such as, Switzerland’s SIX – Group with the SDX Exchange and Japan’s Osaka Stock Exchange Osaka Digital. At the same time major financial organisations have introduced DLT solutions, such as JP Morgan’s Kinexys (formerly known as Onyx) as a platform for trading major currencies and tokenised securities. Roundup of relevant Crypto asset rules USA In the early days of crypto-assets’ existence there was an incoherent framework on how securities regulators would be treating them, then in 2018, a landmark court ruling in the US brought some much needed clarity on the issue. The Commodity Futures Trading Commission brought charges against an entity alleging that cryptocurrencies are commodities and as such any security referencing them is under CFTC purview. The courts adjudicated in favour of the CFTC and this created a legal precedent for crypto-coins, categorising them as commodities. The USA has yet to formulate a comprehensive legislation package at a federal level, although federal bodies such as the Securities and Exchanges Commission, the CFTC and FDIC have enacted policies towards better regulating the crypto space. E.g. the SEC is accepting feedback from interested parties as part of its own rulemaking for crypto assets under the umbrella of the Crypto Task Force and the process is ongoing as of the date of publication of this blog. EU In 2020, the European Commission communicated its intention to develop a framework for digital finance across the EU which included crypto-assets. This spurred the European Supervisory Authorities -ESAs (ESMA, EIOPA, EBA) and the ECB to begin preparatory work on the said package. This eventually led to the adoption of the MICA package in 2022. The said package came into effect in 2024. The ESAs have produced additional guidance such as ESMA’s criteria for the qualification of crypto assets as financial instruments. UK In 2018 the UK government launched the crypto assets Taskforce consisting of HM Treasury, the FCA and the Bank of England. The Taskforce in its final report identified trends in the ecosystem and set a path
Canada’s Revised Trade Repositories and Derivatives Data Reporting Rules
In 2018 when the Committee on Payment and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued the Technical Guidance for the Harmonisation of critical OTC derivatives data elements (the CDE), one by one securities commissions from across the world began implementing the CDE in their derivatives reporting rules. In July 2024 the Canadian Securities Administrators announced that the Canadian implementation of the CDE will begin to apply from the 25th of July 2025. In this blog we will present a few of the major changes the revised spec introduces. Reporting format Unlike other jurisdictions such as the EU, UK, Australia and Singapore, the revised Canadian specs do not require a specific reporting format (e.g. xml, csv, json etc.) as such the TRs will be presenting to their end clientele their preferred submission method. Additional validations The current Canadian reporting spec did not mandate many reporting validation rules for TRs to implement prior to accepting a given submission. The revised rules introduce a host of validation rules e.g. several data points are either conditional, or mandatory, optional, or not required at all, subject to how other data points within the report are communicated. This creates a much more rigid reporting framework where reporting entities will need to consider the conditions for each data value reported. Position Level Reporting The Canadian implementation of the CDE also introduces the possibility (under specific circumstances) for reporting entities to report derivatives at a position level. In simple terms derivatives, which are fungible, with the same counterparty can be netted into a single derivative report, for which the counterparties will report collateral and valuation messages. The conditions/what instruments are eligible for position reporting are laid out in the CSA Derivatives Data Technical Manual. Unique Product Identifier – UPI As we have mentioned in previous blogs (see here for a brief overview and an explanation on the UPI’s technical aspects) the UPI is being deployed for the revised Canadian reporting. The UPI is a unique code that identifies the OTC derivative that the counterparties will be trading with. Upon coming into effect, the revised Canadian reporting rules will require the UPI for all derivative classes except for commodities. Canadian authorities will require the UPI for commodities at a later stage. It should be noted that where the UPI denotes as its underlying OTHER due to the fact that the underlying reference value is not included in ANNA DSB’s UPI enumeration lists, additional data elements must be reported. Transaction Identifier – UTI The Canadian reporting revised spec endorses the ISO 23897:2020 spec regarding the Unique Transaction Identifier (UTI). Counterparties will need to construct the Unique Trade Identifier in accordance with the technical specs of the said ISO as established by the Regulatory Oversight Committee. The UTI will have a length of up to 52 characters, where characters 1-20 will be the LEI of the Generating Entity, followed by unique code assigned by the same entity. Action and Event Types Similar to other jurisdictions’ implementation of the CDE the revised Canadian reporting specs introduce different Events applicable to different Action Types. Consider the following examples: Compression Where 2 counterparties proceed with a portfolio compression exercise whereby they terminate some, or all, outstanding derivative trades between them and replace the terminated trades with another derivative(or derivatives) whose combined notional value is equal or less than the combined notional value of the terminated trades then the termination (TERM) and new action (NEWT) types should be accompanied by a compression (COMP) event. Exercise A counterparty decides to exercise an American Put Option before its expiry date. This triggers an obligation to report a termination to the TR, the said termination message must be accompanied by the exercise event type (EXER). Allocations A counterparty trading on behalf of clients, executes a bulk trade with another derivatives dealer and then allocates to each client its portion of the bulk trade. The counterparty will report a new trade with each client with the combination action type new (NEWT) and event type allocation (ALOC). The allocation reports will be linked to the trade with the derivatives dealer by reporting the Prior Unique Trade Identifier (PriorUTI) value. The PriorUTI value should be the same UTI as the one used to report trade between the counterparty-derivatives dealer. Derivative reports outstanding as at the go live date of the revised Canadian rules. Derivatives that were reported under the existing Reporting Regime and which are still outstanding (i.e. non-terminated) should be updated to the new data requirements with the Action-Event combination Modification – Update after the revised go live date. It should be noted that the Transaction Identifier code for these outstanding derivatives will not be updated to the new standard. MAP FinTech is in process of updating its systems and processes to assist clients who have an obligation to report in any Canadian jurisdiction. Contact our team of experts for more information or any assistance you may require. Disclaimer: The above blog was written by MAP FinTech’s internal teams and under no circumstance does it replace advice or guidance by Firms’ compliance and/or risk management functions. Firms affected by the Canadian rewrites should consult with their compliance/risk management personnel and or consultants for specific guidance and must not rely on the information contained herein.
EMIR 3-Initial Margin Requirements
EMIR as a set of rules contains many provisions, including but not limited to conduct rules for Central Clearing Counterparties, provisions mandating the clearing of certain OTC derivatives, treatment of derivatives traded on EEA and third country venues, risk mitigation techniques for OTC derivatives uncleared by a CCP, and a reporting obligation. In December 2024 regulation EU 2024/2987 came into effect. The aforesaid regulation amends EMIR in significant ways and has been colloquially dubbed “EMIR 3”. The new rules touch mostly upon the issues of clearing and risk mitigation techniques. It is already widely known that EMIR 3 introduced a requirement for EEA based counterparties to reduce their exposure to non-EEA Clearing Houses by mandating FCs and NFCs+ to open, maintain and actively use accounts with EEA Clearing Houses. One of the least discussed requirements of EMIR 3 however is the requirement placed on NFC+ and FCs with respect to initial margin models for OTC derivatives uncleared by CCPs. Margin RTS vs EMIR 3 : What’s the difference With the so called Margin RTS the EU set requirements regarding the eligibility, management and segregation, the terms for the exchange of margin (mostly initial margin) with respect to OTC derivatives uncleared by a CCP, as well as thresholds/conditions below/under which the Margin RTS can be disapplied. EMIR 3 does not undo the requirements under the Margin RTS, which remain unaffected. EMIR 3 Initial Margin Model – Approval by NCAs Under EMIR 3 FCs as well as NFCs + before implementing a new model for the exchange of initial margin between themselves and their counterparties they will need to apply for authorisation by their home competent authority. If FCs and/or NFCs+ intend to amend a previously authorised model, that triggers a new request for approval by their home NCA. As per EMIR 3 NCAs will have 6 months to approve/reject a new initial margin model, or 3 months to approve/reject a modification to an already approved model. Pro-forma models Many counterparties implement pro-forma initial margin models such as the ISDA Standard Initial Margin Model (ISDA-SIMM), said counterparties will still be required to submit a request for approval from their NCAs, however the process is expected to be expedited by the European Banking Authority which will set-up, maintain and update a centralised database which will validate the said pro-forma models submitted by interested parties. Counterparties that seek approval of their initial margin models based on a pro-forma model will need to include in the application for approval the appropriate references to the EBA’s database. Enhanced supervision of large Investment Firms/Credit institutions EMIR 3 also envisages enhanced supervisory procedures for Investment Firms/Credit Institutions which have a monthly average outstanding notional amount of non-centrally cleared OTC derivatives of at least EUR 750 billion. The supervisory procedures will be co-developed by the European Supervisory Authorities (EBA, ESMA, EIOPA). Exemptions: Single Equity, Index OTC options EMIR 3 ushered a welcomed exception; the new regime allows parties trading Single Equity or Equity Index options to exempt themselves from the requirement of exchanging collateral. Complyport Tech notes that this applies to OTC options uncleared by a CCP. Furthermore, our own subjective view is that considering how plain vanilla option contracts operate and taking into account that collateral is exchanged to hedge against counterparty default risk, we welcome the approach. Opinion by the EBA The EBA has identified early on, that the new ruleset creates a number of issues given that the pro-forma database has yet to be completed, the ESAs have yet to determine the appropriate supervisory mechanisms for NCA’s to scrutinise large investment firms/credit institutions, as well the status of initial margin models already in place prior to EMIR coming into effect. As such the EBA has published an opinion with which it clarifies a few important issues Firms that implemented initial margin models before the entry into force of EMIR 3 are not required to seek approval from their NCA’s to continue using said models. Nevertheless, if firms modify the said models after EMIR 3 came into force they should seek the appropriate approval from their regulators. The format and content of the application that firms need to submit to their NCA’s for approving new IM models or modifying previously approved models. An instruction to the NCAs to deprioritise their supervisory or enforcement actions with respect to large investment firms/credit institutions till after the ESAs finalise their work on the supervisory processes (and they come into effect). An instruction to the NCAs to deprioritise their supervisory or enforcement actions with respect to the applications they receive pursuant to EMIR till the ESAs finalise their guidance or recommendations. Sectoral Impact – EEA based CFD providers Considering that many EEA CFD providers trade with retail clients by and large the initial margin model CFD providers follow is set out in the restrictive measures set by the NCA’s across the EEA(the list is not exhaustive): 3.33% initial margin of the notional value where the underlying is a currency pair comprised of any 2 of the following currencies USD, EUR, JPY, GBP, CAD or CHF. 5% initial margin of the notional value where the underlying is any one of a selected list of Equity Indices (e.g. S&P500, CAC40, DJIA, etc.). 5% initial margin of the notional where the underlying is gold. 5% initial margin of the notional where the underlying is a currency pair comprised of 1 of the currencies referred to in the first bullet point. 10% initial margin of the notional where the underlying is a Commodity Index or an Equity Index not referred to in the second bullet point. 50% initial margin of the notional where the underlying is a crypto asset. 20% initial margin of the notional where the underlying is a single stock. The above restrictive measures on face value are an initial margin model within the meaning of EMIR 3. Considering that the said initial margin model existed before the application of EMIR 3, there is no need for CFD providers to seek approval from their NCAs, regarding the specific case
Virtual Power Purchase Agreements – EMIR (EU/UK)
As the global focus on reducing carbon emissions and the transition towards renewable energy sources, Virtual Power Purchase Agreements (VPPAs) or Financial Power Purchase Agreements (FPPAs) have emerged as a mechanism for companies aiming to meet sustainability targets and mitigate energy price volatility. This blog explores these instruments, their regulatory reporting obligations, and how Complyport Tech can assist clients in navigating this complex landscape What Are Virtual Power Purchase Agreements A Virtual Power Purchase Agreement is a formal multiyear agreement between an energy producer and a consumer (corporate), for the sale of electricity at a prefixed price. Unlike physical power purchase agreements, there is no physical delivery of electricity, but the contract is financially settled. I.e., the energy producer (seller) supplies its electricity output to the electricity grid and the consumer’s (buyer) supply of electricity is independent from the VPPA. The financial settlement process may differ from VPPA to VPPA, but the most common form is as follows. The Parties to the contract agree that each billing cycle, if the fixed price is above the prevailing market price for electricity (as published by a third party such as power exchanges like Nord Pool) the seller (energy producer) will pay to the buyer (consumer) the difference between fixed contract price and prevailing market price (adjusted for the output as defined in the contract). If the prevailing market price is above the contract fixed price, the buyer (consumer) will pay the difference to the seller (energy producer). Moreover, in several VPPAs the energy producer will deliver to the consumer a so-called Energy Attribute Certificate (EAC). The said EAC is evidence that the energy the consumer bought comes from renewable sources. EACs are tradeable and transferable in many jurisdictions, as countries from around the world are scrambling to offer incentives towards transitioning to clean energy sources. As such, the consumer may also stand to gain from trading EACs obtained under the VPPA. EACs come in many flavours such as the EU’s Guarantee of Origin (GoOs) harmonising the EAC system of EU member states, the US’s Renewable Energy Certificates (RECs) and the UK’s Renewable Obligation Certificates (ROCs). Finally, it is worth noting that the financial settlement process of the VPPA allows for such contracts to be cross-border, e.g. the producer may be established in a different country than the consumer. Why are Virtual Power Purchase Agreements subject to EMIR reporting As we have analysed in the previous paragraph VPPAs are complex, usually long-term commodity (electricity) contracts which are financially settled. Therefore, such contracts fall under the perimeter of a derivative financial instrument. Moreover, given the bilateral nature of such contracts these are OTC unlisted and, in most cases, uncleared (by Central Clearing Counterparty) derivatives. Additionally, depending on the terms of the agreement, VPPAs may have the characteristics of a forward , a contract for difference, a swap, or even a swaption. Considering all of the above, the said contracts fall under the scope of the EU’s and/or the UK’s EMIR rules that capture all derivative financial products. As such, both the energy producer and the consumer, upon entering a VPPA become subject to the provisions of EMIR which include, inter-alia, a reporting obligation. How can Complyport Tech assist At Complyport Tech we understand that in many cases producers and consumers cannot set up by themselves the necessary processes for EMIR reporting, as such, we offer various options for parties to a VPPA including a service whereby, we take upon ourselves to: Analysing the VPPA agreement, either bespoke contracts or standardised master agreements (e.g. ISDA, EFET) in order to identify the commercial aspects. Mapping the commercial aspects of the VPPA to the values required under EMIR. Enriching the EMIR report with other requisite data such as interconnection points, delivery zones, electricity load types. Creating and submitting reports on behalf of such clients to an EU or a UK Trade Repository. Providing the end client with the relevant files (e.g. TR responses, submitted files) for their records. Contact our team of experts for more information or any assistance you may require.