After consultation with their members, AFME, FIA, ICMA, ISLA and ISDA have collectively released the Master Regulatory Reporting Agreement (MRRA). The MRRA is a standardised document, which firms can use with clients for the purposes of managing the reporting of certain financial transactions to trade repositories.
Whilst broadly following the format and language used in the original ISDA/FIA EMIR Reporting Delegation Agreement (the Existing Reporting Agreement), the MRRA also allows for:
- greater flexibility with regard to the type of reporting obligation e.g. delegated or mandatory reporting;
- a broader range of financial transaction types to be reported e.g. whether derivative transactions pursuant to EMIR1 (as amended by the EMIR Refit Regulation2) or securities financing transactions pursuant to SFTR3; and
- the impact of Brexit on existing reporting arrangements.
Whilst the Existing Reporting Agreement dealt with the ability for a derivatives counterparty to delegate its EMIR reporting obligations, both the EMIR Refit Regulation and SFTR require that, where one of the counterparties to the relevant transaction is a financial counterparty (FC) and the other party an NFC4, the FC will be responsible and legally liable for reporting on behalf of both itself and its counterparty and ensuring the accuracy of the details reported5 (Mandatory Reporting). The MRRA's modular approach allows parties to agree various annexes (and to add new ones as regulatory deadlines approach) in order to meet their requirements, whether mandatory or delegated.
The reporting obligations in relation to securities financing transactions (SFTs) will be phased in over a nine-month period commencing on 11 April 2020. As was the case with EMIR, the dates from which entities are required to start reporting SFTs vary depending upon their "entity type", with investment firms and credit institutions being the first to have to comply with respect to any SFTs concluded on or after 11 April 20206. Where one counterparty is in scope and the other is not, the reporting counterparty may need to obtain data from its counterparty and require a waiver of any confidentiality requirements to ensure it is able to make the relevant disclosure to the trade repository. Although firms may already have arrangements in place with their counterparties for these purposes, the MRRA includes the necessary language to achieve this.
How can Dentons help?
Dentons' experienced team would be happy to assist you with any transition to the MRRA from your existing reporting agreements. We understand that many firms may have adapted the Existing Reporting Agreement to meet their internal needs and we would be delighted to assist in aligning your agreements with the broader reporting capabilities of the MRRA.
Similarly, with a solid track record in large-scale repapering projects, Dentons would be happy to discuss how best to assist with any planned repapering exercise in order to update existing client documentation.
1 Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories dated 4 July 2012 as amended or replaced from time to time.↩
2 Regulation (EU) 2019/834 of the European Parliament and of the Council amending Regulation (EU) No 648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories dated 20 May 2019.↩
3 Regulation (EU) 2015/2365 of the European Parliament and of the council on transparency of securities financing transactions and of re-use and amending regulation (EU) No 648/2012 dated 25 November 2015, as amended or replaced from time to time.↩
4 An NFC, for the purposes of the EMIR Refit Regulation, means a non-financial counterparty whose aggregate month-end average position at group level in OTC derivative contracts (excluding hedging transactions) calculated by reference to month-end data for the previous 12 months does not exceed any of the specified clearing thresholds. For the purposes of SFTR, an NFC shall be a non-financial counterparty which, on its balance sheet date, does not exceed at least two of the three following thresholds: (i) balance sheet total of €20 million (ii) net turnover of €40 million; or (iii) an average of 250 employees during the financial year.↩
5 Note that SFTR mandatory reporting will not be relevant until 11 January 2021 but that, unlike EMIR, there will be no ability for an NFC to opt out of the mandatory reporting and make its own reports.↩
6 Note that there is also a backloading obligation where certain SFTs that have been entered into before the reporting start date remain in force for 180 days after that date, with the cut-off date for reporting being 190 days after that date.↩
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