Treasury and Capital Markets

Transcription

1 Treasury and Capital Markets EMIR Services 2013 ITC Infotech This report is solely for internal use. No part of it may be circulated, quoted, or reproduced for distribution outside the organization without prior written approval from ITC Infotech.

2 Our Strength in Treasury and Capital Markets Products FX Interest Rate Derivatives Money Markets Equity Derivatives Fixed Income Listed Futures & Options Commodities Deposit / Loans Equities Repo / Sec Lending Credit Derivatives Structured Products Market Access Broker-Dealer (OTC) ECN / e- Channels Exchanges Client Access / Channels Sales Channels Trading Desks (Voice) Front Office Pre-Trade analytics & Setup Order and Trade Management Trade Confirmation Trade and Position Blotter Analytics Pricing P&L (Real-time) Middle Office Position and P/L Monitoring Limits Management Market Risk Credit Risk Collateral Valuation Simulation (Stress & Back Testing) Regulatory Compliance Back Office General Ledger Accounting Confirmation Payment Instructions Regulatory Reporting Position Management Reconciliation Corporate Actions Client Position & P/L Subledger Proprietary Position & P/L Sub-ledger Margin Management Financial, MIS and Legal Reporting Custody Depository Management Clearing and Settlement Reference Data Rates and Prices Legal Entity & Organization Structures Contracts Definition Reference Data Client / Counterparty Static data Account Definitions Securities Master Strong Medium Low Payment / Message SWIFT/ FIX Local Payment Networks Bank Custody / Depository 2013 ITC Infotech 2

3 EMIR Background European Market Infrastructure Regulation (EMIR) established by ESMA EMIR has been in force since August In order to address the roots of the financial crisis, the G20 countries committed to address risks related to the derivative markets. As a result, the European Parliament and the Council have adopted a regulation that requires OTC derivative contracts to be cleared, derivative contracts to be reported and sets a framework to enhance the safety of central clearing counterparties (CCP) and for Trade Repositories (TR). This regulation was adopted on 4 July 2012 and entered into force on 16 August It is directly applicable in all the European member states The regulation establishes new requirements for OTC derivatives clearing and reporting The main obligations under EMIR are: Central Clearing for certain classes of OTC derivatives Application of risk mitigation techniques for non-centrally cleared OTC derivatives; Reporting to trade repositories Application of organisational, conduct of business and prudential requirements for CCPs Application of requirements for Trade repositories, including the duty to make certain data available to the public and relevant authorities ESMA aims to increase transparency in the derivatives industry by: Ensuring firms specify the details of derivatives transactions that need to be reported to trade repositories. Defining the trade repository data to be made available to relevant authorities. Creating a set of information required to be provided to ESMA for the authorization and supervision of trade repositories ITC Infotech 3

4 EMIR Reporting Background Area Scope and Requirement Reporting Obligation Entities OTC Derivatives and Dates Record keeping Description Under EMIR, OTC and exchange-traded derivatives transactions entered into by EU counterparties are to be reported by end of day on T+1 to a trade repository that is either registered with ESMA or recognized by ESMA if outside the EU. These cover new contracts, modification and termination of existing contracts Exchange Traded Contracts: Requirements will be published after stakeholder inputs Reporting obligations is place on both counterparties to a derivatives contract (including CCP s) Financial Counterparties Non-Financial Counterparties Counterparties may delegate reporting to one of the two counterparties Individuals are not subject to the reporting obligation Third Party Providers can be used for reporting Entities involved Financial Counterparties / Non-Financial Counterparties CCP s Trade Repositories Third Party Providers OTC Derivatives Contracts covered by first reporting date First reporting date: Credit, Interest Rate, Equity, FX and Commodity Derivatives Contract (Now February 2014) Collateral and daily valuation on Credit, Interest Rate, Equity, FX and, Commodity Derivatives Contract (TBC) Requirements for terminated contracts At least 5 years for counterparties At least 10 years for Trade Repositories 2013 ITC Infotech 4

5 Data Groups to be reported 1. Counterparty 2. Common 3. Collateral 4. Beneficiaries Information on both counterparties, reported separately by each counterparty or their appointed reporting entity (26 data fields) Information to report varies by asset class and includes class of derivative, contract details and terms, mark-tomarket valuation and contract modifications (59 data fields). Common data only needs to be reported by one counterparty Information on collateral exchanged by the counterparties must be reported. Reporting can be done on a portfolio basis if the information on individual contracts is not available Beneficiaries of the contract need to be identified in the trade report. Where the transaction is executed by a structure representing a number of beneficiaries (e.g. fund), the structure rather than individuals is identified 5. Valuations 6. Confirmations 7. Code Systems 6. Record Keeping Mark-to-market valuations of the contract must be updated and reported daily (exemption for non-financial counterparties below the clearing threshold) Must report on the type, date and time of confirmation. Confirmations do not need to be sent to the TR Where available, code systems such as Legal Entity Identifiers will be used to identify parties, products, and trades Counterparties must retain records of all derivative contracts (and modifications) for at least 5 years after termination 2013 ITC Infotech 5

6 Key Data for Reporting 1. Counterparty Data Both Counterparties and appointed Reporting Entities have to provide this data 3. Valuation: Daily valuation data is required in order to obtain mark-to-market valuation of the outstanding contracts. Mark-to-market or mark-to-model will assist in ensuring more accurate quantification of the counterparties exposure. CCP s are required to provide valuation data on cleared OTC contracts 2. Common Data One counterparty can report this information on behalf of themselves and other counterparty. These need to be indicated and reported only once Legal Entity Identifier (LEI) code All entities (counterparties, reporting entities, CCP, TR s, etc.) will be identified by a LEI code Unique Trade Identifiers (UTI) These are required to ensure accurate identification of reported trades. The responsibility of creating UTIs is on the counterparties. This can be delegated Universal / Unique Product Identifiers (UPI) There has been a request for adoption of ISDA UPI taxonomy. In the event a globally agreed product identifier is not available, a number of alternatives have been identified ISIN (International Securities Identification Number) AII (Alternative Instruments Identifier) 4. Collateral: ESMA requires collateral information to complement the information on exposures. Counterparties can report collateral exchanged for an individual contract to trade repositories and may report collateral exchanged on a portfolio basis if individual contract information is unavailable. Portfolio information should include collateral value and currency. Counterparties and CCPs have been given 6 months after the reporting start date of respective asset classes to implement reporting mechanisms to capture both daily valuation and collateral information. Modifications and terminations of contracts are also required to be reported under EMIR. Both counterparties must report, although firms will be able to do so on behalf of their clients CFI (Classification of Financial Instruments code 2013 ITC Infotech 6

7 What do clients need to do? Key Areas that Clients/Firms need to prepare for and execute under EMIR Client and Product Review Identify / classify their counterparties (and products) as financial, non-financial or individual/private clients Identify derivatives to be centrally cleared and those that will need risk mitigation techniques Identify and selection of derivative type for reporting obligation start date Ensure the total number of outstanding contracts are counted to ensure reconciliation at the TR and other such requirements Reporting Report their OTC and exchange traded derivatives contracts to Trade Repositories (TR) Identify the data requirements and review / assess against internal systems and capabilities Firms can delegate reporting to third parties and should assess these reporting services Clearing Arrange for all derivative contracts deemed clearing eligible by the ESMA to be centrally cleared by a CCP. Non-financial counterparties will be subject to clearing requirements only if their derivatives positions exceeding the clearing threshold set out under EMIR Margin and collateral standards for trades clearing through European CCP s are also defined under EMIR Risk Management and Compliance Firms need to comply with margin and capital requiremetns for derivatives contracts Firms must also comply with certain risk management requirements for unclear contracts (including timely trade confirmation, daily mark to market or mark to model valuation, reconciliation, compression and dispute resolution) 2013 ITC Infotech 7

8 Our Expertise and Credentials Because of our understanding and expertise in the Capital Markets area, and our research of EMIR requirements, we are ready to support a range of clients who need to make the necessary changes from a business operations and systems to be prepared for EMIR Key areas of expertise Experience with these asset classes (FX, Interest Rate Derivatives, etc.) Experience with Reference Data (Counterparty) and Trade/Transaction Data Hands-on expertise with the main data elements and specific to the asset class Experience with source system data analysis, gap reviews, data extraction Experience with data transformation, data storage Understanding the aspect of enterprise architecture where the information relating to products i their life-cycle stage We have already done a gap analysis for Kondor+ systems as an illustrative source and mapped out all the required data elements. Please see Appendix for this analysis. Our specific services related to the EMIR implementation are detailed in the next slide 2013 ITC Infotech 8

9 EMIR Our Service Offering Regulatory Reporting and Compliance (EMIR) How ITC Infotech can help? Service Offerings Consulting Functional Testing Data Extraction & Organization Interface Development Data Analysis & Mapping Reports & Dashboards Data Extraction & Organisation: While you organise your EMIR response strategy and implementation plans generally, you can begin your plans in respect of the EMIR reporting obligation. Data mitigation and planning: Identification of data sets required Data sets classification Data sourcing across multiple internal systems Data reporting and entities to report to. Data sets that can be used for multiple regimes (e.g., MiFID, etc) Pre-defined solution for Kondor+ users Key Enablers Strong TCM Domain Knowledge and Skills Strong understanding of regulatory reporting and compliance requirements such as EMIR, BASEL II, Dodd Frank, etc. Dedicated TCoE focused on BI & DW, Data Analytics and Reporting (Dashboards) Tools Usage Informatica, Cognos, BO, Tableau, etc ITC Infotech 9

10 EMIR Services Kondor+ Example 2013 ITC Infotech This report is solely for internal use. No part of it may be circulated, quoted, or reproduced for distribution outside the organization without prior written approval from ITC Infotech.

11 EMIR Data Mapping and Analysis - Kondor+ Section Reference Data Transaction Data Product Definition Gap Derived Non - Derived Derived Non - Derived Derived Non Derived 1.Counterparty Data Common Data Data Classification & Source 2a.Contract Type 4 2b.Transaction Details 14 2c.Risk Reporting 1 2d.Clearing 2e.Interest Rates 8 2f.Forex 4 2g.Commodities 2h.Options 3 2i.Modifications to the Report Data Type Data Category Source Static Data Entities K+ / K+TP Transaction Data Deal Details/Collateral/ Valuations Product Definition Instrument Details K+ Summary K+ / K+TP /KGR Section EMIR Mapped Gap 1.Counterparty Common Data ITC Infotech 11

12 EMIR Data Mapping - Kondor+ Common Data Sections Total Fields Contract Type 7 Transaction Details 18 Risk Reporting 2 Clearing 5 Interest Rates 8 Forex 4 Commodities 10 Options 3 Modifications to Report 2013 ITC Infotech 12 2

13 THANK YOU 2013 ITC Infotech