Articles de fond
THE REPORTING OBLIGATION UNDER EMIR
Jonathan Hug'
Legal Advisor, BNP Paribas Securities Services
"Major failures of regulation and supervision,
plus reckless and irresponsible risk taking by
banks and other financial institutions, created
dangerous financial fragilities that contributed
significantly to the current crisis. A return to
the excessive risk taking prevalent in some
countries before the crisis is not an option. "2
The above quote from the G20 leaders' statement
of the Pittsburgh summit held on 24-25 September
2009 illustrates some of the assessments made by
the representatives of the world largest national
economies in relation to the financial crisis that
has occurred in 2007/2009. Following such assess-
ments a certain number of initiatives were launched
worldwide to create a regulatory environment ad-
dressing these concerns, notably with the Dodd
Franck Act' in the United States. At the European
level, one of this regulatory reaction has resulted
in the enactment of regulation (EU) No 648/2012
of the European Parliament and of the Council of
4 July 2012 on OTC derivatives, central counter-
parties and trade repositories (also called the Eu-
ropean Market Infrastructure Regulation, thereafter
"EMIR"); it was published in the Official Journal
of the European Union of 27 July 20104 and came
into force on 16 August 2012. EMIR is the result
of an international political willingness to improve
transparency and regulatory oversight of over-the-
counter derivatives ( "OTC derivative contracts").
The main reproaches made to OTC derivative con-
tracts were (i) their lack of transparency as they are
privately negotiated contracts whose characteristics
are only available to the contracting pa rties and (ii)
the fact that they create a complex web of interde-
pendence between market players without a clear
view on the nature and level of the risks involved by
the transactions documented by these contractual
1 Les opinions exprimes dans cet article sont personnelles
et n'engagent que son auteur.
2 10, Strengthening the International Financial Regulatory
System, G20 Leaders Statement: The Pittsburgh Summit,
http://www.g20.utoronto.ca/2009/2009communique0925 .
html
3 Whose entire reference is Dodd Franck Wall Street
Reformer and Consumer Protection Act, available at the
below link https://www.govtrack.us/congress/bills/111/
hr4173/text
4 Regulation (EU) No 648/2012, OJEU L 201, 27/07/2012,
p.1 to 59
A 14 U - Bulletin Droit et Banque N 54 - Dcembre 2014
arrangements. To mitigate these aspects of the OTC
derivative contracts, it has been decided to create
a new legal framework thereto, but also for some
aspects to exchange traded derivative contracts,
and EMIR is the cornerstone of this regulatory
environment now applicable within the European
Union, and, de facto, in Luxembourg. EMIR sets
up three main obligations to be complied with by
market participants of the European Union entering
into derivative contracts: (i) clearing of OTC de-
rivative contracts through a central counterparty5,
(ii) implementation of risk-mitigation techniques
for non-cleared OTC derivative contracts 6 and (iii)
reporting to a trade repository of all details pertain-
ing to derivative contracts'.
Even if reporting is one of the key obligations aris-
ing from EMIR, it is not defined by specific pro-
visions. The reference to reporting describes it as
a process of storing information pertaining to de-
rivatives contracts as well as their inherent risks
and making that information easily accessible to
the European Securities and Markets Authority
( "ESMA") and the relevant competent authorities'.
In that respect, the reporting of information pertain-
ing to derivative contracts shall be made to a trade
repository, being a new character of the derivatives
market, and whose legal regime is subject to spe-
cific provisions of EMIR. Making that information
accessible and imposing reporting requirements on
market participants to ensure consistency of the
information stored with the trade repositories will
then create transparency in the derivatives market.
Reporting may, as a result, be defined by its finality
as aiming to collect information from the market
for an effective supervision and enabling the regu-
lators, on the basis of the data gathered, to identify
and reduce risks associated with derivatives mar-
ket. The aim of this article is to focus specifically
on that reporting obligation, which shall bring more
transparency in an area of contractual relationships
whose main characteristics were, for the time be-
5 Whereas 13 of Regulation (EU) No 648/2012, Article 4 of
Regulation (EU) No 648/2012
6 Whereas 24 of Regulation (EU) No 648/2012, Article 11 of
Regulation (EU) No 648/2012
7 Whereas 41 of Regulation (EU) No 648/2012, Article 9 of
Regulation (EU) No 648/2012
8 Whereas 41 of Regulation (EU) No 648/2012
41
Articles de fond
ing, the bilateral undisclosed ties between the re-
spective market pa rticipants.
EMIR imposes new obligations to pa rties entering
into derivative contracts but it is not a single piece
of legislation. The text of the regulation (EU) No
648/2012 is setting the scene of the new regulatory
framework applicable to OTC derivative contracts
but details are fine-tuned in additional pieces of
legislation. In that respect, EMIR is supplemented
and completed by Commission delegated regula-
tions' and Commission implementing regulations10
which will address the peculiarities and specifici-
ties of the rules applicable under EMIR. In addi-
tion to these pieces of legislation, ESMA has also
a key role to play in the implementation of EMIR
as it contributes to the enactment of the delegated
regulations but it also ensures a consistent interpre-
tation of these new rules by providing guidelines to
the market pa rticipants in the form of questions and
answers. These ESMA questions and answers" (the
"ESMA Q&As") are guidelines, designed to an-
swer specific queries, amended and updated from
time to time, and consisting in a dialogue between
the market participants raising queries on the im-
plementation of EMIR and ESMA answering those
queries.
By its wide scope of application covering OTC de-
rivative contracts but also exchange traded deriva-
tives contracts, EMIR cannot be ignored in Luxem-
bourg as Luxembourg entities entering into deriva-
tive contracts will have to comply with that piece
of legislation. However, even if the implementation
of EMIR seems prima facie cumbersome and com-
plex, it might also create opportunities to credit in-
stitutions and service providers of the financial sec-
tor in Luxembourg. Clients entering into derivative
contracts will seek assistance in the implementation
of these new regulatory standards and will be look-
ing for service providers being able to ensure the
compliance with these new rules on their behalf In
that respect, EMIR should be seen in Luxembourg
as an opportunity to provide new high added value
services to clients, notably regarding the reporting
obligation, which can be delegated by the market
participants. Compliance with these new rules and
provision of adequate services dedicated to clients
will contribute to the reputation of quick adaptation
of the Luxembourg financial sector to regulatory
9 See notably Commission Delegated Regulations (EU) No
148/2013, No 149/2013, No 150/2013, No 151/2013, No
152/2013 and No 153/2013 of 19 December 2012, OJEU L
52, 23/02/2013, p.1 to 74
10 See notably Commission Implementing Regulations (EU),
No 1247/2012, No 1248/2012 and No 1249/2012 of 19
December 2012, OJEU L 352, 21/12/2012, p.20 to 39
11 ESMA Questions and Answers on the Implementation of
Regulation (EU) No 648/2012 on OTC derivatives, central
counterparties an d trade repositories (EMIR) dated 10
July 2014, http://www.esma.europa.eu/content/QA-VIII-
EMIR-Implementation
42
challenges faced by clients and will underline, in
these changing times, the willingness of Luxem-
bourg to apply new regulatory and supervisory pro-
visions.
In order to grasp the main specificities of the re-
porting obligation under EMIR, its scope of appli-
cation (I) shall be first discussed, before having a
look at its implementation (II).
I. Scope of application of the re-
porting obligation
The reporting obligation under EMIR has to be
complied with by the market pa rt icipants (A),
which are requested to provide the information per-
taining to derivative contracts to a trade repository
(B).
A. A reporting to be made by the market
participants ...
The main preliminary questions to be examined
when dealing with the reporting obligation under
EMIR are: (1) which are the entities concerned by
that reporting and (2) which are the derivative con-
tracts subject to that reporting?
1. The market participants concerned by
the reporting
The market pa rticipants concerned by the report-
ing obligations are the counterparties and the cen-
tral counterparties (the "CCPs") 12, which are the
persons interposing themselves between the coun-
terparties to the contracts traded on one or more
financial markets 13 . Since the CCPs concerned by
the reporting obligation under EMIR can be easily
identified on the ESMA website as they are autho-
rised or recognised to provide services under EMIR
within the European Union, a focus shall be made
on the counterparties as only (a) counterparties to
a derivative transaction that are located (b) inside
the European Union are concerned by the reporting
obligation.
a) Counterparties to a derivative transac-
tion ...
The counterparties to a derivative transaction fall-
ing within the scope of EMIR are classified in
two categories: (i) financial counterparties and (ii)
non-financial counterparties. This classi fi cation
is merely the result of the implementation of the
clearing obligation under EMIR but it cannot be ig-
nored from the reporting obligation perspective as
it provides a description of the counterparties con-
cerned. Furthermore, there are no legal exemptions
applicable to the reporting obligation. As a result,
all financial and non-financial counterparties to a
12 See A rticle 9 (1) of Regulation (EU) No 648/2012
13 See A rticle 2 (1) of Regulation (EU) No 648/2012
ALJB - Bulletin Droit et Banque N 54 - Dcembre 2014

derivative transaction will have to comply with the
clearing obligation14.
i) Financial Counterparties
A rt icle 2 of Regulation (EU) No 648/2012 dealing
with the definitions lists the types of financial coun-
terparties : an investment firm 15 , a credit institu-
tion 16, an insurance undertaking 17, an assurance un-
dertaking 18, a reinsurance undertaking 19 , a UCITS
and, where relevant its management company 20, an
institution for occupational retirement provision21
and an alte rnative investment fund ("AIF") man-
aged by alte rn ative investment fund manager(s)22.
All these regulated or authorised entities under rel-
evant European Union legislation are, as a result,
financial counterparties under EMIR.
From a Luxembourg financial sector perspective,
this wide definition has a considerable impact as all
the main actors of the financial sector are concerned
by the reporting obligation from the investment
firms and the credit institutions to the UCITS and
the AIFs, but also including the insurance and re-
insurance undertakings. Notwithstanding this wide
definition of financial counterparties, there are also
other undertakings that fall within the scope of the
reporting obligation under EMIR, the non-financial
counterparties.
ii) Non-Financial Counterparties
The non-financial counterparties are basically de-
fined as undertakings not falling within the finan-
cial counterparties' category. This definition gener-
ally includes all entities that are not regulated or
authorised under relevant EU legislation such as
corporates or special purpose vehicles 23 , but also
financial entities under national legislation. As a
consequence, securitisation vehicles, regulated or
unregulated24 under Luxembourg legal provisions,
will fall within the category of non-financial coun-
terparties under EMIR25.
Surprisingly the term "undertaking" is not defined
in EMIR, but some guidance can be found in the
14 Subject, nevertheless to the establishment of the
counterparties within the European Union, as further
detailed in paragraph I) A) 1) b) of this a rt icle.
15 Authorised in accordance with Directive 2004/39/EC
16 Authorised in accordance with Directive 2006/48/EC
17 Authorised in accordance with Directive 73/239/EEC
18 Authorised in accordance with Directive 2002/83/EC
19 Authorised in accordance with Directive 2005/68/EC
20 Authorised in accordance with Directive 2009/65/EC
21 Within the meaning of Article 6(a) of Directive 2003/41/
EC
22 Authorised or registered in accordance with Directive
2011/61/EU
23 See notably point 10 of the European Commission EMIR
Frequently Asked Questions dated 10 July 2014, http://
e c. europ a. eu/internal_market/financial-markets/doc s/
derivatives/emir-faq s_en.pdf
24 Within the meaning of the Luxembourg law of 22 March
2004 on securitisation as amended.
25 See notably ESMA Q&As, General Answer 3 (iii)
A J - Bulletin Droit et Banque N 54 - Dcembre 2014
Articles de fond
EMIR FAQs of the European Commission 26 . Ac-
cordingly, an undertaking can be defined as an entity
operating in one or more economic sectors and the
focus shall be made on the nature of the activities
carried out by the entity rather than on the nature of
the entity itself. This is the result of a judgement of
the European Court of Justice which specifies that
"the concept of an undertaking encompasses every
entity engaged in an economic activity, regardless
of the legal status of the entity and the way in which
it is financed"27 . The economic activity carried out
by the undertaking is then the key characteristic to
be assessed to determine whether such undertak-
ing qualifies as a non-financial counterparty under
EMIR. As a result, non-profit entities but also indi-
viduals carrying out an economic activity will be
considered as non-financial counterparties 28 and be
subject to the reporting obligation. Public sector en-
tities fulfilling that criterion will also be subject to
the reporting obligation except for the ones charged
or intervening in the management of public debt29.
As a result, financial counterparties and non-finan-
cial counterparties will have to comply with the re-
porting obligation under EMIR, but only, if they are
established inside the European Union.
b) ... within the European Union
EMIR's geographical scope of application is the
whole European Union due to the fact that it is a
European Union regulation. However, a focus shall
be made (i) on the entities within the European
Union that will be subject to the reporting obliga-
tion, notably in their place of establishment, and (ii)
on the influence of the place of establishment of the
other counterparty on the reporting.
i) Place of establishment of the counterparty
The counterparties under EMIR are categorised as
financial counterparties and non-financial counter-
parties but the place of their establishment is also of
impo rtance when determining if they have to com-
ply with the reporting under EMIR. As mentioned
previously, financial counterparties are defined as
regulated or authorised entities under relevant EU
legislation, which, in general, implies that they are
established in a Member State of the European
Union. Non-financial counterparties are defined as
undertakings not being financial counterparties es-
tablished in the European Union. The term "estab-
lished" is therefore the key element regarding the
geographical . scope of application of EMIR, even if
it is not defined directly in EMIR. The term "estab-
lished" should however be understood by the mar-
ket participants as meaning "incorporated". There-
26 See Part II point 14 of European Commission EMIR
Frequently Asked Questions dated 10 July 2014
27 Case C-41/90, Hfner and Elser, [1991] ECR I-1979
28 See notably ESMA Q&As, General Answer 1 (b)
29 See A rt icle 1 (4)(a) of Regulation (EU) No 648/2012
43
Articles de fond
fore any entity incorporated in a Member State of
the European Union and qualifying as financial
counterparty or non-financial counterparty will be
subject to the reporting obligation under EMIR. On
the contrary, an entity incorporated in a jurisdiction
outside the European Union will be considered as
a third country entity and will not be subject to the
reporting obligation under EMIR 30. Moreover a
branch of a third country entity has to be considered
as being part of the same legal entity 3 ', thus subject
to the same jurisdiction as the one where the parent
entity is established. As a result a branch, located in
the European Union, of a third country entity will
be considered as a third country entity and will not
subject to reporting obligation under EMIR.
ii) Influence of the place of establishment of
the other counterparty
A derivative transaction under EMIR involves two
counterparties. If both counterparties are estab-
lished in a Member State of the European Union,
both of them will be subject to the reporting obliga-
tion under EMIR. However, what happens if one
of the counterparties to the derivative transaction
is established within the European Union and the
other one is not? In such a case, the counterparty
established in the European Union will have to (i)
report that transaction, irrespective of the fact that
its counterparty is established in a third count ry and
(ii) identify its counterparty even if this counterpar-
ty is established in a third country 3z
In conclusion, from a Luxembourg perspective all
counterparties (being financial or non-financial
counterparties) established in Luxembourg will be
subject to the reporting obligation under EMIR.
The question that comes obviously thereafter is:
what are the derivatives in-scope of the reporting
obligation?
2. The derivative contracts subject to the
reporting obligation
The derivative contracts subject to the reporting
obligation under EMIR are (a) exchange traded
derivatives ("ETDs") as well as over-the-counter
derivatives ("OTCs"). However it shall also be as-
sessed whether (b) only the conclusion of these de-
rivatives contracts is covered by EMIR or whether
the reporting obligation covers other events affect-
ing those contracts and not only their conclusion.
a) ETDs and OTCs
Unlike the clearing obligation and the risk-mitiga-
tion obligations focusing only on OTC derivative
30 See notably ESMA Q&As, TR Answer 15
31 See notably ESMA Q&As, OTC Answer 12 (f)
32 See notably ESMA Q&As, TR Answer 12 and ESMA
Q&As, TR Answer 15, as in accordance with A rt icle 9 (5)
of Regulation (EU) No 648/2012 at least the identities of
the pa rt ies to the derivative contracts should be reported to
trade repositories.
44
contracts, the reporting obligation under EMIR
contemplates derivatives contracts 33, being (i)
ETDs and (ii) OTCs, in its scope of application'''.
i) ETDs
ETDs are not directly defined in EMIR. A rticle 2 of
regulation (EU) No 648/2012 provides a definition
of derivative contracts by making a cross-reference
to some of the financial instruments listed in one of
the annex's to the Directive 2004/39/EC on Mar-
kets in Financial Instruments ( "MiFID" )36 . As a
consequence, any option, future, swap, forward and
other derivative contract relating to securities, cur-
rencies, interest rates, financial indices, commodi-
ties, financial contract for differences and credit de-
fault swap are falling in the definition of derivative
contracts under EMIR. In that context, ETDs can
be defined as derivatives contracts in relation to the
financial instruments listed above which are admit-
ted to trading on a derivatives exchange. Moreover,
ETDs are also characterised by their standardisa-
tion as the derivatives exchanges, where they are
traded, will set the terms to be complied with by
those derivative contracts in order to be traded on
such exchanges.
ii) OTCs
Contrary to ETDs, OTCs are defined in EMIR as
derivative contracts, as listed previously, the ex-
ecution of which does not take place on a regu-
lated market within the meaning of MiFID or on
a third country market considered as equivalent to
a regulated market within the meaning of MiFID37.
Accordingly, derivative contracts traded on mul-
tilateral trading facilities are OTCs in the context
of EMIR35 . Apart from these references in EMIR,
OTCs can generally be defined as derivative con-
tracts directly negotiated and concluded between
the counterparties, with some of them being stan-
dardised such as interest rate swaps, while many
are not.
One of the main concerns of the market pa rticipants
was the treatment reserved to spot market foreign
exchange agreements ( "FX spots contracts"). Due
to the broad definition of OTCs resulting from the
provisions of EMIR, FX spots contracts might be
considered as derivative contracts and be subject
to the reporting obligation. It shall however be
noted that for the European Commission FX spot
contracts are not considered to be financial instru-
ments, but that position was taken for the purpose
33 Whereas 41 of Regulation (EU) No 648/2012
34 A rt icle 9 (1) of Regulation (EU) No 648/2012 mentions
"(...) the details of any derivative contract (...)are reported
to a trade repository (...) ".
35 points (4) to (10) of Section C of Annex 1 to MiFID
36 OJEU L 145, 30/04/2004, p.1 to 88
37 A rticle 2 of regulation (EU) No 648/2012
38 See notably ESMA Q&As, OTC Answer 1 (a)
ALJ B - Bulletin Droit et Banque N 54 Dcembre 2014

of MiFID39. The application of this position of the
European Commission, specific to MiFID, within
the context of EMIR, is leading to the exclusion of
FX spot contracts from the reporting obligation and
is supported by many of the market pa rt icipants40.
That legal uncertainty has led to an exchange of
correspondence between ESMA and the European
Commission', whereby the European Commission
is suggesting to ESMA to consider whether specific
guidelines are necessary to achieve a harmonised
application of the reporting obligation under EMIR
before the implementation of MiFID 2, notably by
providing a list of derivative contracts that might be
considered as FX spot contracts. Further clarifica-
tions on that delicate question might be expected
from ESMA.
As a result, the reporting obligation under EMIR
applies to both OTCs and ETDs, however those de-
rivative contracts have lifecycles and some of the
events affecting their lifecycles, notably their con-
clusion, have to be reported.
b) Their conclusion but not only ...
The different events affecting the lifecycles of de-
rivative contracts need to be reported under EMIR
in order to provide a clear and updated view of the
respective exposures of the market participants
related to such derivative contracts. The events in
question regarding those derivative contracts are
primarily (i) their conclusion, modifications and
termination but also, for OTCs, the fact that they
might become (ii) cleared trades.
i) Conclusion, modification, termination
To ensure that the information provided to the trade
repositories is complete, A rt icle 9 (1) of Regulation
(EU) No 648/2012 stipulates that the details of any
concluded derivative contract, and of any modifica-
tion or termination of that contract shall be reported
to a trade repository. ESMA has specified in one of
its guidelines, to avoid any problem of interpreta-
tion that, for the purpose of this provision of EMIR,
the conclusion of a contract means the execution of
a transaction42 . Due to the general formulation of
39 http://ec.europa.eu/yqol/index.cfm?fuseaction=question.
show&questionld=191
40 See notably the contribution from the Global Foreign
Exchange Division of the Global Financial Markets
Association http://ec.europa.eu/internal market/
consultations/2014/foreign-exchange/does/contributions/
individuals-and-others/global-fx-division-of-gfma_en.pdf,
or from the European Banking Federation, http://www.ebf-
fbe.eu/wp-content/uploads/2014/05/EBF 007865 E-EBF-
response-on-FX-contracts-final.pdf
41 http://www.esma.europa.eu/system/files/2014-184letter_
tocommissioner_barnier - classification_offinancal
instruments.pdf, http://www.esma.europa.eu/system/
files/ares2014513399_ec_response_on_classifi cation_
of_ financial instruments.pdf , http://www.esma.europa.
eu/system/files/ec_letter_to_esma_on_clas sification_of_
financial_ instruments 23 07 2014.pdf
42 Article 1 (1) (a) of Commission Delegated Regulation
A1.4 B - Bulletin Droit et Banque N 54 Dcembre 2014
A rticles de fond
the aforementioned EMIR provision, any kind of
modifications affecting the derivative contract shall
be reported. Moreover, even if transactions execut-
ed during the same day are netted or terminated for
other reasons, they have to be reported43
Regarding specifically the termination of the de-
rivative contract, if such termination takes place in
accordance with the original terms of the contract
and if the trade repository adequately identifies this
termination date, it can be assumed that such ter-
mination was originally reported at the time of the
reporting of the conclusion of such derivative con-
tract and no additional reporting is required in that
respect. As a result, only termination taking place
at a date different from the original term of the con-
tract should be reported'''.
ii) Cleared trades
Basically, clearing is the process by which the
two counterparties to an OTC derivative contract
replace that original contract by two separate con-
tracts with a CCP and the CCP takes over each
counterparty's positions under the original con-
tract. The clearing obligation will, however, only
apply if the OTC derivative contract belongs to a
class of derivatives contract that has been declared
subject to the clearing obligation45 and is entered
into by the counterparties to which that clearing
obligation applies. The fact that the OTC derivative
contract is cleared shall indeed be reported as per
the requirements of table 1 of the Annex of Com-
mission Delegated Regulation (EU) No 148/2013,
but what about an OTC derivative contract which
was not cleared at the time of its conclusion and
which becomes, at a later stage, subject to clearing.
This can be the case for example of a non-financial
counterparty, which is at the time of conclusion of
the derivative contract below the clearing thresh-
old, and further exceeds that clearing threshold. In
this situation some of the OTC derivative contracts
entered into by that non-financial counterparty will
need to be cleared. The reporting provisions deal-
ing with such situation are clear: when an existing
contract is subsequently cleared by a CCP, notably
due to the application of the clearing obligation that
clearing should be reported as a modification of the
existing contract".
Once the counterparties to derivative contracts
have determined whether they fall or not within
the scope of application of the reporting obligation
under EMIR and that the derivative contracts that
have been concluded are also concerned by that
(EU) No 148/2013
43 See notably ESMA Q&As, TR Answer 11 (c)
44 See notably ESMA Q&As, TR Answer 12
45 by ESMA according to of Article 5 (2) Regulation (EU) No
648/2012.
46 Article 2 (1) of Commission Delegated Regulation (EU)
No 148/2013
45,
Articles de fond
reporting obligation, they will need to make that
reporting to a trade repository.
B. ... to a trade repository
The aim of the trade repositories is to collect data
for regulatory purposes that is relevant to authori-
ties in all Member States of the European Union4'.
With such assigned mission, the trade repositories
are without any doubt (1) key players of the report-
ing under EMIR. However trade repositories are
also new players of the derivatives market and in
that context some additional explanations might be
given on their interaction with other market partici-
pants, notably on (2) the timeframe of the reporting
to be made to these trade repositories.
1. The trade repository as key player of the
reporting
The trade repository is an entity, to which ce rtain
information pertaining to derivative contracts shall
be reported. Currently there are six trade reposito-
ries registered with ESMA 48, including one estab-
lished in Luxembourg being Regis-TR S.A. 49 A
focus shall be made on (a) the establishment of a
trade repository and on (b) its role in the derivative
contracts market.
a) Establishment of a trade repository
Regarding the establishment and further function-
ing of a trade repository, (i) the role of ESMA is of
paramount importance as (ii) specific requirements
have to be complied with by that trade repository.
i) The role of ESMA
A trade repository must be registered with ESMA
for the purpose of the reporting obligation under
EMIR50 . The applicant entity shall be a legal per-
son established in the European Union meeting
specific requirements and shall submit an applica-
tion51 for registration to ESMA52 . ESMA then as-
sesses whether the application is complete, within
20 working days of receipt of the application. If the
application is not complete, ESMA sets a deadline
by which the applicant must provide additional in-
formation, and after assessing that an application is
complete, the ESMA notifies the applicant accord-
ingly53 . Within 40 working days from this notifica-
tion, ESMA examines the application for registra-
tion and either adopts a fully reasoned registration
decision or refuses the registration 54 . Once that
47 Whereas 74 of Regulation (EU) No 648/2012
48 http://www.esma.europa.eu/content/List-registered-Trade -
Repositories
49 http://www.regis-tr.com/
50 Article 55 (1) of Regulation (EU) No 648/2012
51 As per the format laid down in A rticle 1 and in the Annex
of Commission Implementing Regulation (EU) No
1248/2012
52 Article 56 (1) of Regulation (EU) No 648/2012
53 Article 56 (2) of Regulation (EU) No 648/2012
54 Article 58 (1) of Regulation (EU) No 648/2012
46
decision is adopted by ESMA, it shall be notified
within 5 working days to the applicant s , and, with-
out undue delay, to the competent local authority
of the Member State where the applicant is estab-
lished56 , and also communicated to the European
Commissions'. If the registration with ESMA is
completed, ESMA publishes the name of the ap-
plicant in the list of the trade repositories registered
in accordance with EMIR58.
Following the publication by ESMA, the registra-
tion of the trade repository59 is then effective within
the entire territory of the European Union 60 . The
registered trade repository must comply at all times
with the conditions for registration and must notify
any material changes thereto without undue delay
to ESMA61 . Once registered, the trade repository is
able to carry out its activities regarding EMIR but
under the supervision of ESMA62 . In that respect,
ESMA has the power to request infotniation from
the trade repository63 , but also to carry out general
investigations64 as well as on-site inspections65 . Pro-
cedural rules have to be complied with by ESMA
for taking such supervisory measures66 , but also for
imposing fines67 and periodic penalty payments 68 to
a trade repository. Accordingly, if a fine or a period-
ic penalty payment is imposed by ESMA to a trade
repository, that information shall be disclosed to
the public69 . ESMA has also the power to withdraw
the registration of a trade repository, notably if the
trade repository in question is no longer meeting
the conditions under which it was registered or if it
has obtained its registration by making false state-
ments or by any other irregular means 70 . A trade
repository is therefore expected to have a close re-
lationship with ESMA due to the above described
registration process but also because requirements
regarding its organisation have to be complied with
under the supervision of ESMA.
55 Article 59 (1) of Regulation (EU) No 648/2012
56 Article 59 (2) of Regulation (EU) No 648/2012
57 A rticle 59 (3) of Regulation (EU) No 648/2012
58 Article 59 (4) of Regulation (EU) No 648/2012
59 A trade repository is registered with ESMA for the
reporting of derivative asset classes. The derivative asset
classes which can be reported to each trade repository
are mentioned in the list of registered trade repositories
available on the ESMA website, http://www.esma.europa.
eu/content/List-registered-Trade-Repositories
60 Article 55 (3) of Regulation (EU) No 648/2012
61 Article 55 (4) of Regulation (EU) No 648/2012
62 Where necessary, ESMA may delegate for proper
performance some of its supervisory tasks to the respective
national supervisory authorities, see notably Article 74 of
Regulation (EU) No 648/2012 in that respect.
63 Article 61 of Regulation (EU) No 648/2012
64 Article 62 of Regulation (EU) No 648/2012
65 Article 63 of Regulation (EU) No 648/2012
66 Art icle 64 of Regulation (EU) No 648/2012
67 Art icle 65 of Regulation (EU) No 648/2012
68 Art icle 66 of Regulation (EU) No 648/2012
69 Art icle 68 of Regulation (EU) No 648/2012
70 Article 71 of Regulation (EU) No 648/2012
ALJ B - Bulletin Droit et Banque N 54 Dcembre 2014

ii) Requirements applicable to the establish-
ment of a trade repository
To carry out its duties under EMIR, a trade reposi-
tory is expected to have robust governance arrange-
ments, including a clear organisational structure
with defined responsibilities and adequate internal
control mechanisms". In addition, it must maintain
and operate an adequate organisational structure
to ensure continuity and orderly functioning in the
performance of its activities72 . The trade reposi-
tory must also be able to identify and manage any
conflicts of interests concerning any of its manag-
ers, employees or any person directly or indirectly
linked to them73 . Moreover, the senior management
and members of the board of the trade repository
are expected to have sufficient experience and rep-
utation to ensure a sound and prudent management
of the trade repository74.
In addition to these organisational requirements,
when making the application for registration the
trade repository must provide information regard-
ing its ownership 75 , and, more particularly, regard-
ing its main shareholders or parent undertaking. An
ownership chart has to be provided in that respect
showing the ownership links between the parent
undertaking, subsidiaries and any other associ-
ated entities or branches 76 . Moreover, ESMA has
specifically indicated that CCPs cannot apply for
registration as trade repositories as their core activ-
ity being clearing shall be legally separated from
additional services such as reporting77.
It must also be emphasised that, when providing ac-
cess to its services to undertakings having to com-
ply with the reporting obligation under EMIR, each
trade repository shall use objective, non-discrim-
inatory and publicly disclosed requirements 78 . A
trade repository shall as well publicly disclose the
prices and fees associated with the services provid-
ed by the trade repository under EMIR, including
discounts and rebates where applicable 79, and the
charged prices and fees shall be cost related to the
services provided by the trade repository80 . Once
all the above requirements are met or implemented,
the trade repository is able to focus on its main role,
71 Article 78 (1) of Regulation (EU) No 648/2012
72 Article 78 (4) of Regulation (EU) No 648/2012
73 Article 78 (2) of Regulation (EU) No 648/2012
74 Article 78 (6) of Regulation (EU) No 648/2012
75 Article 3 of Commission Delegated Regulation (EU) No
150/2013
76 Article 4 of Commission Delegated Regulation (EU) No
150/2013
77 See notably ESMA Q&As, TR Answer 2
78 Article 78 (7) of Regulation (EU) No 648/2012
79 The fees associated with the services provided by trade
repositories are impo rtant information for enabling market
participants to make an informed choice, See Whereas 8 of
Commission Delegated Regulation (EU) No 150/2013
80 Article 78 (8) of Regulation (EU) No 648/2012
AL B - Bulletin Droit et Banque N 54 - Dcembre 2014
Articles de fond
gathering data and making it available as per the
conditions laid down in EMIR.
b) Role of the trade repository
The role of the trade repository is to collect data
for regulatory purposes'', which implies (i) record-
keeping of the reported data and (ii) making such
reported data available to the respective regulatory
authorities and, under ce rt ain conditions, to the
public.
i) Record keeping
Prior to receiving any data, the trade repository
must ensure that the confidentiality, integration
and protection of the collected information is guar-
anteed82 . Once the information pertaining to the
reporting obligation under EMIR is received, the
trade repository shall record and maintain it for at
least 10 years following the termination of the rel-
evant derivative contracts 83 . Moreover timely and
efficient record keeping procedures have to be used
by the trade repository to document changes to the
recorded information. In addition, the pa rt ies to a
derivative contract must be allowed to have access
to the information pertaining to that contract in a
timely manner, and, if necessary, be able to cor-
rect the aforesaid information84 . Finally, the trade
repository must also take all reasonable steps to
prevent any misuse of the information maintained
in its systems and collected from undertakings hav-
ing to comply with the reporting obligation under
EMIR85.
These obligations regarding the recordkeeping of
the data reported to the trade repository must be
complied with by each trade repository on an on-
going basis. If the recordkeeping of the reported
data in a safe and efficient manner is the first task of
each trade repository, its second task is making that
data available to the respective regulatory authori-
ties, and under ce rt ain conditions, to the public.
ii) Data availability
Regarding access to data, a functional approach has
been chosen, whereby entities accessing the report-
ed data should be considered in accordance with
the competences they have and the functions they
perform86 . As a result, a trade repository is expect-
ed to collect and maintain data so that ESMA 87 and
the respective competent supervisory authorities"
81 See Whereas 74 of Regulation (EU) No 648/2012
82 Article 80 (1) of Regulation (EU) No 648/2012
83 Article 80 (3) of Regulation (EU) No 648/2012
84 Article 80 (5) of Regulation (EU) No 648/2012
85 Article 80 (6) of Regulation (EU) No 648/2012
86 See Whereas 1 of Commission Delegated Regulation (EU)
No 151/2013
87 Moreover Article 9 (3) of Regulation (EU) No 648/2012
specifies that if a trade repository is not available to record
the details of a derivative contract, counterparties and
CCPs shall ensure that such details are reported to ESMA.
88 For a specific list of the entities concerned, see A rticle 81
47
Articles de fond
have direct and immediate access to the details of
derivative contracts they need to fulfil their respec-
tive responsibilities and mandates 89 . Accordingly, a
trade repository shall provide access to all transac-
tion data to ESMA and to some specific data to the
respective competent supervisory authorities under
ce rtain conditions90
To ensure that information is also provided to the
market, EMIR states that a trade repository must
regularly, and in an easily accessible way, publish
aggregate positions by class of derivatives on the
contracts reported to it91 . More specifically, trade
repositories shall publish aggregate data with
specifics breakdowns on their websites or online
portals easily accessible to the public, updated at
least on a weekly basis 92 . As a consequence, the
data made available by the trade repository to the
public does not cover all the peculiarities of a spe-
cific derivative contract; such data is only avail-
able to ESMA93 , and, under certain conditions, to
competent supervisory authorities. That approach
is therefore consistent with the main objective set
by EMIR to the trade repositories, i.e. collecting
data for regulatory purposes. A question remains
however yet unanswered: when must such report-
ing be made by the market pa rticipants to the trade
repositories?
2. Timeframe of the reporting to the trade
repository
The timeframe of the reporting to the trade reposi-
tories consists in (a) the timing observed by a mar-
ket pa rticipant to make the reporting to the trade
repository, and (b) the timeline for implementation
of the reporting regarding derivatives contracts al-
ready in place.
a) Timing of the reporting (T+1)
According to Article 9 (1) of Regulation (EU) No
648/2012, any conclusion, modification or termi-
nation of a derivative contract shall be reported to
a trade repository no later than one day following
the occurrence of such event. The general principle
may be then formulated as follows: the obligation
to repo rt to a trade repository shall be complied at
T+1 (T being the date of the conclusion, modifi-
cation or termination of the derivative contract).
ESMA has specified in that respect that when there
are no conclusion, modification, or termination of
(3) of Regulation (EU) No 648/2012
89 Article 81 (2) of Regulation (EU) No 648/2012
90 A rt icle 2 of Commission Delegated Regulation (EU) No
151/2013
91 A rt icle 81 (1) of Regulation (EU) No 648/2012
92 A rt icle 1 of Commission Delegated Regulation (EU) No
151/2013
93 Moreover, in case a trade repository is not available to
record the details of a derivative contract, counterparties
and CCPs shall ensure that details are reported directly to
ESMA, see A rt icle 9 (3) of Regulation (EU) No 648/2012.
48
the derivative contract, there is no need to send
daily reports'.
b) Timeline for implementation of the report-
ing
The implementation of the reporting is character-
ised by (i) a starting date and (ii) a phased-in report-
ing, to allow the market participants to back load
derivative contracts outstanding and/or terminated
between the date of the entry into force of EMIR,
being 16 August 2012, and the starting date of the
reporting obligation.
i) Starting date of the reporting
The starting date of the reporting obligation in re-
spect of all derivatives contracts was 12 February
2014, being 90 days after the first registration of
trade repositories with ESMA in accordance with
the provisions of a rt icle 5 of the Commission Im-
plementing Regulation (EU) No 1247/2012. How-
ever, to allow some time to the market pa rt icipants
to implement all the necessary steps regarding all
the data to be reported, an additional lapse of time
was given regarding the reporting of the collater-
alisation and valuation of the derivative contracts.
As a consequence, financial counterparties and
non-financial counterparties had the obligation to
repo rt collateral and daily mark-to-market valua-
tion as from 11 August 2014, i.e. six months after
the initial starting date. Currently, all data required
under EMIR has to be reported to the trade reposi-
tories. However, a phased-in reporting has been put
in place by the European legislator regarding the
back loading of some derivative contracts.
ii) Phased-in reporting
EMIR also contains provisions 95 enabling a phased-
in reporting96 regarding the back loading of the
existing derivative contracts or the derivative con-
tracts that have been terminated, but which were
outstanding at the date of the entry into force of
EMIR, being 16 August 2012 97 . Such phased-in re-
porting has been set up to mitigate the operational
risk for the trade repositories regarding the volume
of data that they will receive, but also to take into
account the difficulties that the market pa rt icipants
may face in reconstructing the date of terminated
contracts98 . As a consequence, the date by which
94 See notably ESMA Q&As, TRAnswer 11 (a). However for
financial counterparties and non-financial counterparties
above the clearing threshold, the valuation of the
outstanding contracts shall be made on a daily basis, see
A rt icle 11 (2) of Regulation (EU) No 648/2012 in that
respect.
95 A rt icle 9 (1) of Regulation (EU) No 648/2012 but also
A rt icle 5 of the Commission Implementing Regulation
(EU) No 1247/2012
96 See Whereas 5 of the Commission Implementing
Regulation (EU) No 1247/2012
97 See point 8 of European Commission EMIR Frequently
Asked Questions dated 10 July 2014
98 See Whereas 5 of the Commission Implementing
ALI B - Bulletin Droit et Banque N 54 Dcembre 2014

the derivative contracts will need to be reported
depends not only on the date it was concluded, but
also on the date it was terminated".
After having determined the scope of application of
the reporting obligation, the main objective for the
market pa rt icipants is to understand how they can
comply with this obligation. In other words, the
implementation of the reporting obligation under
EMIR must be analysed.
Il. Implementation of the reporting
obligation
The implementation of the reporting obligation
concerns (A) the data to be reported, which might
also lead to questions regarding (B) the responsibil-
ity of the reporting, notably on the manner it can be
performed as well as on the sanctions that might be
applied if the reporting is not performed in compli-
ance with the provisions of EMIR.
A. The data to be reported
The details of the data to be reported under EMIR
to a trade repository by the pa rties to a derivative
contract are set out in the Commission Delegated
Regulation (EU) No.148/2013 and in the Commis-
sion Implementing Regulation (EU) No.1247/2012.
These two pieces of legislation list the fields (85 in
totals) to be completed for each transaction repo rt .
For the purpose of the present analysis, rather than
examining each of the fields of a transaction repo rt ,
the focus will be made on (1) the specificity of the
data to be reported. A closer look shall also be giv-
en at the art iculation of the communication of data
pertaining to the pa rt ies and the derivative contracts
under the reporting obligation with (2) the restric-
tions on disclosure of information to be respected
by the respective parties to the derivative contract.
1. The specificity of the data to be reported
The information to be reported to the trade reposi-
tory includes (i) data about the counterparties to the
derivative contracts (the "Counterparty Data"),
Regulation (EU) No 1247/2012
99 For derivative contracts entered into on or after 12
February 2014, such derivative contracts need to be
reported no later than one day following their conclusion
(i.e. on T+1). For derivative contracts entered into since
16 August 2012 and outstanding on 12 February 2014,
such derivative contracts shall have been reported by 12
February 2014. For derivative contracts entered into before
16 August 2012 and outstanding on 12 February 2014,
such derivative contracts shall have been reported by 13
May 2014. For derivative contracts entered into before 16
August 2012 and outstanding on 16 August 2012 but no
longer outstanding on 12 February 2014, such derivative
contracts shall be reported by 12 February 2017. For
derivative contracts entered into sincel6 August 2012
but no longer outstanding on 12 February 2014, such
derivative contracts shall also be reported by 12 February
2017.
A L J I3 - Bulletin Droit et Banque N 54 Dcembre 2014
A rticles de fond
and (ii) data about the derivative contracts them-
selves (the "Common Data").
a) The Counterparty Data
The Counterparty Data covers 26 fields to be com-
pleted by the party issuing the transaction repo rt
and concerns notably the identity of the pa rties to
the derivative contract, the collateralisation and the
valuation of the derivative contract. Regarding the
identification of the parties, a focus shall be made
on (i) the legal entity identifier as it is a new iden-
tification code to be obtained by the market par-
ticipants to comply with the reporting obligation
under EMIR. The other impo rt ant aspects of the
counterparty data requiring a deeper analysis are
(ii) the collateralisation and valuation of the deriva-
tive contract, being the main object of the repo rt , as
this information is essential to ascertain the expo-
sure between the pa rties to such derivative contract.
i) Legal Entity Identifier (LEI)
Under EMIR, markets part icipants must identify
themselves. In order to ensure consistency, each
party to a derivative contract must be identified
by a unique code 10'. For that purpose, they have to
obtain a global legal entity identifier (the "LEP").
The LEI is a 20-digit alpha numeric code that en-
ables clear and unique identification of companies
participating in global financial markets. A LEI
can only be obtained from authorised providers
and LuxCSD has been endorsed by the Regulatory
Oversight Committee as a pre-local operating unit
(LOU) to issue LEIs in Luxembourg 10 '. The LEI,
by its identification role of the different counterpar-
ties, will increase the systemic risk analysis capa-
bilities of the regulators. It will also facilitate the
aggregation of risk exposure and, thus, contribute
to financial stability, but it will also enable a better
risk management, as by that identification, a clear
map of the different exposures between the market
part icipants might be realised.
The principle is that each counterparty to a deriva-
tive contract shall have a LEI. Regarding umbrella
funds and sub-funds, ESMA has specified that if
the derivative contract is entered into at the level
of the sub-fund, the counterparty shall be the sub-
fund and not the umbrella fund. In that case, the
sub-fund shall have a LEI and shall be identified
as the counterparty in the relevant report 102 . In case
of undertaking assuming the obligations of a liq-
uidated or insolvent undertaking regarding deriva-
tive contracts, the LEI to be used should be the one
of the undertaking assuming the obligations of a
100 See Whereas 4 of Commission Implementing Regulation
(EU) No 1247/2012
101 http://www.leiroc.org/publications/gls/lou_20131003_2.
pdf
102 See ESMA Q&As, General Answer 1 (c)
49
Articles de fond
liquidated or insolvent undertaking 103 . Regarding
branches of a legal entity, the LEI of the parent le-
gal entity should be used 104 . Even though the LEI
is without any doubt one of the key information to
be provided as counterparty data under EMIR, the
impo rt ance of the reporting of collateralisation and
valuation cannot be neglected.
ii) Collateralisation and Valuation
Data pertaining to the valuation and collateralisa-
tion of a derivative contract is impo rtant notably in
terms of assessment of the exposures between the
respective counterparties 105 . This is the reason why
such particular data shall be reported under EMIR.
The valuation data to be reported is the date, time,
type (i.e. mark to market 106 or mark to model) and
currency as well as the value itself of the respec-
tive derivative contract 107 . Financial counterparties
and non-financial counterparties above the clearing
threshold are subject to a stringent requirement re-
garding valuation as they shall repo rt the mark to
market or mark to model valuations of contracts to
a trade repository on a daily basis 100 . As a conse-
quence, for transactions cleared by a CCP, the con-
tract valuation should be reported on a daily basis
at position level, as maintained and valued by the
CCP in accordance with A rt icle 3 (5) of Commis-
sion Delegated Regulation (EU) No 148/2013109.
The collateral data concerns the value and currency
of the collateral posted by the reporting counter-
party to the other counterparty, but also indication
whether the collateralisation has been performed
on a po rtfolio basis or not 10 . The collateralisation
details can be reported on a transaction level ba-
sis, however the collateral might also be calculated
on the basis of net positions resulting from dif-
ferent derivative contracts and might therefore be
posted on a po rtfolio basis. In that respect, A rt icle
3 of Commission Delegated Regulation (EU) No
148/2013 allows a counterparty to repo rt to a trade
repository collateral posted on a po rt folio basis
when the collateralisation is not made on a trans-
103 See ESMA Q&As, TR Answer 4 (d)
104 See ESMA Q&As, TR Answer 10 (c) This is the approach
to be followed for branches, but further developments
regarding the LEI of branches of a legal entity might be
expected.
105 See Whereas 5 of Commission Delegated Regulation (EU)
No 148/2013
106 ESMA Q&As, TR Answer 3b (e) specifies that when a
price is available, the valuation shall be considered as mark
to market.
107 Fields 17 to 21 of Annex to Commission Delegated
Regulation (EU) No 148/2013
108 Article 11 (2) of Regulation (EU) No 648/2012 and Article
2 of Commission Implementing Regulation (EU) No
1247/2012
http://www.leiroc.org/publications/g1s/lou_20131003_2.pdf
109 See ESMA Q&As, TR Answer 3b (a)
110 Fields 22 to 26 of Annex to Commission Delegated
Regulation (EU) No 148/2013
50
action level basis. Nevertheless ce rtain conditions
have to be complied with to perform a reporting
on a po rt folio basis: each single transaction has to
be assigned to a specific po rt folio and the relevant
information on the po rtfolio shall be reported on a
daily basis".
Once the fields pertaining to the Counterparty Data
have been filled in, the reporting counterparty shall
repo rt the details pertaining to the derivative con-
tract and the transaction, i.e. the Common Data.
b) The Common Data
The Common Data covers 59 fields to be complet-
ed by the party issuing the transaction repo rt and
concerns information about the specificities of the
transaction and the derivative contract but also pe-
culiarities for some specific type of derivative con-
tracts. For the purpose of this a rticle, the analysis of
the content of the common data will be limited to
the new requirements of identification and classifi-
cation laid down in EMIR regarding the transaction
itself and the contract type. To comply with these
regulatory obligations, the markets pa rt icipants
will need to provide new identifiers: (i) the unique
transaction identifier regarding the transaction and
(ii) the unique product identifier regarding the con-
tract type.
i) The Unique Transaction Identifier (UTI)
The counterparties to a trade shall generate a unique
trade identifier (the "UTI") for each derivative
contract to enable trade repositories to aggregate
and compare data across different trade reposito-
ries 12 . The UTI will therefore be used for recon-
ciliation of the reported data in case counterparties
are reporting to different trade repositories 13 . This
unique trade identification, that can have up to 52
characters 14, shall be agreed at European level15,
but, for the time being, no UTI framework has yet
been endorsed by ESMA 16 . Therefore, a unique
code should be currently generated and agreed with
the other counterparty 17 . To assist the market par-
ticipants in that respect, ESMA has provided some
guidelines, and also examples, regarding the UTI
construction" 8 and the UTI generation19
Ill See ESMA Q&As, TR Answer 3a (a)
112 Article 4 (2) of the Commission Delegated Regulation
(EU) No 151/2013
113 See Whereas 2 of the Commission Delegated Regulation
(EU) No 148/2013
114 See table 2 field 8 of annex of the Commission
Implementing Regulation (EU) No 1247/2012
115 See table 2 field 8 of annex of the Commission Delegated
Regulation (EU) No 148/2013
116 ESMA Q&As, TR Answer 10 (a)
117 See table 2 field 8 of annex of the Commission Delegated
Regulation (EU) No 148/2013; ESMA Q&As, ETDs
Reporting Answer 5
118 See ESMA Q&As, TR Answer 18
119 See ESMA Q&As, TR Answer 19
A LI B - Bulletin Droit et Banque N 54 Dcembre 2014

Only one UTI should be applicable to a derivative
contract subject to the reporting obligation under
EMIR and the same UTI is not to be used to any
other derivative contract 120. Once a transaction has
been capable of being identified by its relevant
UTI, the question is how to classify that transaction
among other derivatives transactions.
ii) The Unique Product Identifier (UPI)
As OTCs are neither uniquely identifiable by exist-
ing codes widely used in financial markets, such as
ISIN 121 , nor identifiable by using the CFI' 22 code, it
has been decided to use a new method of identifica-
tion 123 . Therefore, a unique product identifier (the
"UPI") has been introduced by EMIR to properly
identify the product in question. In that respect,
the applicable provisions of Commission Imple-
menting Regulation (EU) No 1247/2012 provide
that a transaction repo rt shall identify a derivative
contract using a UPI 124 . The aim of the UPI clas-
sification is to create a new and universal method
of identification of OTC derivatives in order to ob-
tain more transparency regarding these contracts.
Therefore, market part icipants shall always keep
in mind when generating a UPI that this identifier
shall follow the principles of uniqueness, neutral-
ity, reliability, open source, scalability, accessibility
and shall also have a reasonable cost basis 125 . For
the time being, no UPI framework has yet been en-
dorsed by ESMA l26. As a consequence, when such
UPI does not exist, the derivative contract shall be
identified by using the combination of the assigned
IS1N Code or Alte rn ative Instrument Identifier
code with the CFI code 127 . If such combination is
not possible, an interim taxonomy (based notably
on derivative class and derivative type classifica-
tion) shall be used in order to generate the neces-
sary UPI128.
Once all the counterparty data and common data
have been gathered in order to repo rt that informa-
tion to a trade repository, the counterparty making
the repo rt might face a conflicting situation if re-
strictions on disclosure of information are appli-
cable.
120 See ESMA Q&As, TR Answer 18
121 International Securities Identification Numbers
122 ISO Classification of Financial Instruments
123 See Whereas 2 of Commission Implementing Regulation
(EU) No 1247/2012
124 Article 4 (1) of Commission Implementing Regulation
(EU) No 1247/2012.
125 See Whereas 2 of Commission Implementing Regulation
(EU) No 1247/2012
126 See ESMA Q&As, TR Answer 10 (a)
127 Article 4 (2) of Commission Implementing Regulation
(EU) No 1247/2012, but see also ESMA Q&As, TR
Answer 22 and ESMA Q&As, TR Answer 23
128 Article 4 (3) of Commission Implementing Regulation
(EU) No 1247/2012, but see also ESMA Q&As, TR
Answer 21
AL 13 - Bulletin Droit et Banque N 54 Dcembre 2014
Articles de fond
2. Data to be reported and restrictions on
disclosure of information
The reporting obligation under EMIR requires that
data pertaining to both counterparties to a deriva-
tive contract and to the contract itself be reported
to a trade repository. This obligation imposed on
the market pa rt icipants might however enter into
conflict with restrictions on disclosure of informa-
tion that have also to be complied with by those
participants. In order to determine which of these
two obligations will prevail, it shall be assessed
what are (a) the restrictions on disclosure of in-
formation that are likely to enter into conflict with
the reporting obligation before having a look at (b)
the authorised disclosure regime resulting from the
provisions of EMIR.
a) The restrictions on disclosure of information
The restrictions on disclosure of information might
be of (i) contractual nature but might also be the re-
sult of the application of (ii) regulatory provisions.
i) Contractual restrictions on disclosure of
information
The restri ctions on disclosure of information are of
contractual nature when they are the result of the
application of specific provisions of an agreement,
to which the counterparties to the derivative con-
tract are parties. Such restri ctions can notably take
the form of confidentiality contractual obligations,
consent to disclosure provisions or non-disclosure
undertakings i29 . The reason of the existence of such
provisions in derivative contracts is to preserve the
confidentiality of the business affairs between the
contracting part ies. However, some counterparties,
in addition to the contractual restrictions on disclo-
sure applicable to them, might be compelled by law
to preserve the information pertaining to their re-
spective counterparties.
ii) Regulatory restrictions on disclosure of in-
formation
The restrictions on disclosure of information are
regulatory obligations when they are the result of
the application of legal or regulatory provisions
that have to be complied with by the respective
counterparties due to the specific legal or regula-
tory regime applicable to them. This will be the
case in Luxembourg, if one of the counterparties
falls within the scope of application of the law of
129 For instance, in an ISDA 2002 Master Agreement, such
clause limiting the disclosure of information can be found
in a Schedule to this type of agreement. Examples of
such clause can be found in Mastering the ISDA Master
Agreements (1992 and 2002) by Paul C. Harding, third
edition, Prentice Hall, Financial Times
51
Articles de fond
5 April 1993 on the financial sector as amended'3o
whose a rt icle 41 contains a professional secrecy
obligation to be complied with by the credit insti-
tutions and the other professionals of the financial
sector131 . By this legal provision, credit institutions
and other professionals of the financial sector 132 are
required to keep secret any information confided
to them in the context of their professional activi-
ties or mandate. As a result, if a credit institution or
a professional of the financial sector enters into a
derivative contract with a counterparty within the
context of its professional activity or mandate, it
will be restricted by law to disclose information
pertaining to that contract.
To accommodate the restrictions on disclosure of
information resulting from contractual provisions
or directly from the law applicable to the counter-
parties to the derivative contract, EMIR contains an
authorised disclosure regime enabling the reporting
of data to trade repositories.
b) The authorised disclosure regime under
EMIR
EMIR provisions specify that a counterparty 133 that
repo rts the details of a derivative contract to a trade
repository or to ESMA, or an entity that reports
such details on its behalf, shall not be considered
in breach of any restriction on disclosure 134 of in-
formation imposed by that contract or by any leg-
islative, regulatory or administrative provision'3s
Moreover, neither the reporting entity nor its di-
rectors or employees shall be held liable for such
disclosure 136 . Consequently, by these provisions,
EMIR creates an authorised disclosure regime en-
abling the respective counterparties to a derivative
contract to comply with their reporting obligation
even if contractual, legal or regulatory provisions
limiting the disclosure of information are applicable
to these counterparties. When amending their exist-
ing contracts or entering into new arrangements,
counterparties to a derivative contracts might also
inse rt provisions dealing with a specific consent of
disclosure of information to comply with the re-
porting obligation under EMIR137.
130 a coordinated version of that law can be found on the
website of the CSSF, www.cssf.lu
131 See notably, one of the last article published on the
subject and the numerous references contained therein:
Patrick Gregorius and Bob Kieffer, Le secret bancaire
luxembourgois: Sense and Sensibility, in Droit bancaire
et financier au Luxembourg 2014, ALJB - Anthemis
Larcier, p.997 to p.1059,
132 as well as notably their administrators, members of
managing and supervisory bodies, directors, employees
and other persons in the service of these natural and legal
persons.
133 It can also be a CCP.
134 See Whereas 45 of Regulation (EU) No 648/2012
135 Article 9 (4) 1 s' paragraph of Regulation (EU) No 648/2012
136 Article 9 (4) 2'' a paragraph of Regulation (E U) No
648/2012
137 Such consent to disclosure provision can for instance be
52'
Having determined what data shall be reported to
a trade repository and that there should be no legal
obstacle to such reporting, the remaining question
concerns the responsibility of the reporting, and,
more basically how this reporting can be performed
and what are the applicable sanctions for breach of
the reporting obligation under EMIR by the market
part icipants?
B. The responsibility of the reporting
The reporting to the trade repository has to be per-
formed by the counterparties to a derivative con-
tract to be compliant with EMIR. Different (1) re-
porting channels can be used for that purpose; oth-
erwise, the counterparties can be held responsible
for non-compliance with the reporting obligation
under EMIR and might face (2) sanctions.
1. Reporting channels
Different channels can be used by the counterpar-
ties to perform the reporting under EMIR: (a) each
counterparty can take care itself of the reporting or
(ii) the reporting can be delegated to the other coun-
terparty to the derivative contract or to a third party.
a) Principle: reporting by each counterparty
In the absence of any delegation agreement, each
party to a derivative contract is required to repo rt
the Counterparty Data and the Common Data. This
implies that each counterparty from an operational
perspective shall be able to collect and to process
all information pertaining to the derivative con-
tract that is necessary to fill in the fields pertain-
ing to counterparty data and to common data in the
transaction repo rt to be sent to the trade repository.
Moreover there is an obligation to repo rt without
duplication 138 . This means that each counterparty
should ensure that there is only one transaction
report (excluding any subsequent modifications)
produced by the respective counterparties for each
trade that they carry out and if the other counter-
party is also obliged to issue a repo rt , this does not
count as a duplication 139 . In that respect, where two
counterparties repo rt the same trade, they shall
ensure that the common data is consistent in both
transaction repo rt s submitted to the trade reposi-
tory.
Consequently different reporting scenarios have to
be contemplated and their complexity will depend
on the derivative contracts concerned, if they are (i)
OTCs or (ii) ETDs.
found in the ISDA 2013 Reporting Protocol, available
under http://www2.isda.org/ and might be necessary for
relations with counterparties not established within the
European Union.
138 Article 9 (1) of Regulation (EU) No 648/2012
139 See ESMA Q&As, TR Answer 7 (b)
ALJ B - Bulletin Droit et Banque N 54 Dcembre 2014

i) Reporting for OTCs
The reporting for OTCs is the most straightforward
one as it will only involve the counterparties to the
OTC contract. If both counterparties to an OTC
contract take care of the reporting itself and repo rt
to the same trade repository, the scenario will be as
follows:
Reporting
Party A
Trade Repository
OTC contract
7 Reporting
Party B
However, there are different trade repositories that
can be used for the purpose of the reporting under
EMIR. As a consequence, the pa rties to a derivative
contract may repo rt to the same trade repository,
but they can also repo rt to different trade reposito-
ries 140 . In such a case (i.e. reporting to separate trade
repositories), a reconciliation process for matching
the data reported to them will need to be performed
by the relevant trade repositories 141 . As a result, if
the counterparties to the OTC contract do not use
the same trade repository, the scenario requires the
involvement of a second trade repository and can
be illustrated as follows:
Reconciliation
Trade Repository Trade Repository
C D
Reporting Reporting
f porting under EMIR themselves and might be keen
Party A Party B
OTC contract
The above described reporting scenarios are the
ones that are likely to be faced by the market par-
ticipants if there is no mechanism of delegation of
the reporting in place. The situation might however
be different for ETDs.
ii) Reporting for ETDs
The reporting for ETDs is far more complex than
the reporting for OTCs as more pa rties, in their
respective capacities, will be involved and will
have to comply with the reporting obligation un-
der EMIR. The following illustration provides only
one example which attests the complexity of the
reporting in case of ETDs for a transaction, nota-
bly regarding the number of repo rt s that have to be
issued.
140 See ESMA Q&As, TR Answer 7 (a) contemplating that
scenario
141 See Whereas 2 of the Commission Delegated Regulation
(EU) No 148/2013
ALJB - Bulletin Droit et Banque N 54 - Dcembre 2014
Articles de fond
Party A
^ Report 2
Report 1
^
Party A
Clearing Member
Report 3 ^ Report 4
^
CCP
Report 5
^
Party B
Clearing Member
^ Report 6
Report 7 ^ Report 8
^
Party B
To summarize 142, all the market pa rticipants in-
volved in the clearing chain will have an obliga-
tion to repo rt any derivative contract that they have
concluded with any of the other pa rticipants: the
CCP clearing the trade, the clearing members of
the CCP that is clearing the trade and the counter-
parties to the derivative contract 143 . ESMA, being
fully aware of the difficulties that might face the
market pa rticipants in that respect, has issued spe-
cific recommendations dealing with ETDs report-
ing 144, including different scenarios and examples
illustrating the different repo rt s to be issued by the
markets participants.
Ce rtain market participants facing such complex
situation might not be willing to take care of the re-
to delegate the reporting to their counterparty or to
a third party provider.
b) Delegation of the reporting
EMIR provisions specify that a counterparty145
which is subject to the reporting obligation, may
delegate the reporting of the details of the deriva-
tive contract 146 . This scenario is likely to happen
when market pa rticipants are willing to use the in-
frastructure and service of their counterparty or of
a third party provider, which is capable to provide
to a trade repository all the required data. As a re-
sult, the general principle of delegation of reporting
under EMIR is that where one counterparty repo rts
the details of a contract to a trade repository on
behalf of the other counterparty, or a third entity
repo rt s a contract to a trade repository on behalf
of one or both counterparties, the details reported
shall include the full set of details that would have
142 In a principal to principal scenario.
143 There might also be the investment firm that executes the
trading venue of which it is a member, if the investment
firm is not itself a counterparty and is trading on the
account of and on behalf of a client
144 See ESMA Q&As, Part V: Reporting to TRs ETD
contracts reporting
145 or a CCP.
146 A rt icle 9 (1) of Regulation (EU) No 648/2012
53
Articles de fond
been reported to the trade repository by each coun-
terparty separately 147 . This implies, from an opera-
tional perspective, that (i) the other counterparty or
(ii) the third party shall be able to have access to the
data pertaining to the related derivative contracts
and to the respective trades.
i) Delegation to the other counterparty
The delegation of the reporting under EMIR from
one counterparty to the other counterparty needs
to be documented. In that respect, the ISDA/FOA
reporting delegation agreement 148 can be used or a
specific delegation agreement might be negotiated
and concluded between the counterparties to the
derivative contracts 149 . As mentioned previously,
the data reported shall include the full set of details
that would have been reported to the trade reposi-
tory by each counterparty separately. Conclusively,
if one transaction repo rt is made on behalf of both
counterparties, it shall contain the information set
out in table 1 of the Annex of Commission Delegat-
ed Regulation (EU) No 148/2013 in relation to each
of the counterparties and the information set out in
table 2 of the Annex, but this information shall only
be submitted once 15. Moreover, the fact that the
transaction repo rt is made by one of the counter-
parties on behalf of both counterparties shall also
be reported 151 . Finally, the fact that the reporting is
performed by the other counterparty does not ab-
solve the other counterparty from its reporting ob-
ligations under EMIR, as it remains liable for any
misreporting made by the reporting counterparty.
In this context, the delegation of the reporting to
the other counterparty might be an efficient way to
address the operational burden resulting from the
implementation of the reporting obligation under
EMIR, but the legal obligation to report accurately
and the consequences for its breach remain with
both counterparties notwithstanding the delegation.
The same situation will be faced in case of delega-
tion of the reporting to a third party.
ii) Delegation to a third party
If a counterparty (or both counterparties) delegate(s)
the reporting of the details of the derivative con-
tracts to be reported under EMIR to a third party,
it (they) remain(s) legally responsible for the re-
porting obligation. This is due to the fact that the
original counterparty is responsible for ensuring
that the third party to whom the reporting has been
delegated performs that reporting accurately15'-.
147 Article 1 (5) of Commission Delegated Regulation (EU)
No 148/2013
148 http://www2.isda.org/news/isdafoa-emir-reporting -
delegation-agreement-published
149 See ESMA Q&As, TR Answer 8 (a)
150 Article I (3) of Commission Delegated Regulation (EU)
No 148/2013
151 Article 1 (4) of Commission Delegated Regulation (EU)
No 148/2013
152 See Part H point 3 of European Commission EMIR
54
The third party to whom the reporting has been
delegated does not necessarily need to be an entity
incorporated within the European Union as long as
the requirements of EMIR regarding the reporting
are complied with and without prejudice to the ulti-
mate responsibility of the original counterparty(ies)
to comply with the reporting obligation' s'. As a re-
sult, the data reported by the third party shall in-
clude the full set of details that would have been
reported to the trade repository by the original
counterparty(ies) if it(they) would have performed
the reporting on its(their) own. In addition, the fact
that the repo rt is made by a third party on behalf
of both counterparties shall also be reported 14. For
Luxembourg entities supervised by the CSSF, such
as undertakings for collective management, there
is no need to submit the delegation agreement for
prior agreement to the CSSF. However, a monitor-
ing procedure in relation to the delegated report-
ing entity might be put in place in order to have an
oversight regarding the data reported to the trade
repository on behalf of the counterparty concerned.
Should counterparties not take care of the report-
ing, either on their own or by delegating that duty,
they might be held responsible for non-compliance
with the reporting obligation under EMIR and
might face sanctions.
2. Sanctions for non-reporting
The sanctions for breaches of the reporting obliga-
tion are not directly described in Regulation (EU)
No 648/2012. EMIR is setting up (i) a general
framework describing the competences and sanc-
tions powers of the respective national supervisory
authorities which has to be (ii) implemented by
each Member State of the European Union, includ-
ing Luxembourg.
a) General sanctions framework in the EMIR
regulation
EMIR provisions state that Member States shall
lay down the rules on penalties applicable to in-
fringements under the reporting obligation 155 and
shall take all necessary measures to ensure that
they are implemented. Those penalties shall be ef-
fective, proportionate and dissuasive 156 and shall
include at least administrative fines. Regarding the
enforcement of these penalties, Member States are
required to act in a manner that does not reduce
the effectiveness of those rules 157 . Member States
must also ensure that the competent authorities re-
sponsible for the supervision of financial and non-
Frequently Asked Questions dated 10 July 2014
153 See Part II point 4 of European Commission EMIR
Frequently Asked Questions dated 10 July 2014
154 Article 1 (4) of Commission Delegated Regulation (EU)
No 148/2013
155 See Whereas 46 of Regulation (EU) No 648/2012
156 Article 12 (1) of Regulation (EU) No 648/2012
157 See Whereas 46 of Regulation (EU) No 648/2012
ALJ B - Bulletin Droit et Banque N 54 Dcembre 2014

financial counterparties disclose every penalty that
has been imposed for infringement of the report-
ing obligation to the public, unless such disclosure
would seriously jeopardise the financial markets
or cause disproportionate damages to the pa rt ies
involved 158 . In addition to the disclosure of this
information to the public, Member States shall, at
regular intervals, publish assessment repo rt s on the
effectiveness of the penalty rules being applied159
Moreover, the penalties imposed for breaches of
the reporting obligation under EMIR will be avail-
able on the ESMA's website160
The responsibility for the implementation of the
sanctions regime applicable for breaches of EMIR
provisions is, as a consequence, in the hands of
each Member State of the European Union, because
as described hereabove, only general principles re-
garding those penalties are contained in EMIR. By
17 February 2013, the Member States should have
notified the rules on penalties applicable to viola-
tion of EMIR161 to the European Commission. The
remaining question concerns therefore the imple-
mentation of such sanctions regime in Luxembourg.
b) Implementation in Luxembourg
EMIR sanctions fall within the competence of the
national supervisory authorities but before being
able to impose any sanctions, they must be autho-
rised to do so by the respective national legislators.
In Luxembourg, the implementation remains to be
made. Therefore, there is currently (i) no specific
sanctions regime in Luxembourg, however (ii) ex-
isting sanctions provisions resulting from the leg-
islation in place might be applied by the CSSF to-
wards counterparties contravening to the reporting
obligation under EMIR.
i) Absence of specific sanctions provisions
EMIR sanctions regime had to be adopted by the
Member States of the European Union by 17 Feb-
ruary 2013 162 and, thereafter, notified to the Euro-
pean Commission. Some Member States, such as
Belgium 163 , have already amended their respective
legislation in order to implement the EMIR sanc-
tion provisions. Consequently, a draft bill will have
to be prepared by the Luxembourg legislator in or-
der to implement the whole EMIR penalties frame-
work and notably to give to the CSSF the neces-
sary powers to sanction market part icipants that are
158 Article 12 (2) of Regulation (EU) No 648/2012
159 See Whereas 46 of Regulation (EU) No 648/2012
160 Article 88 (1) (b) of Regulation (EU) No 648/2012
161 The outcome of the notifications to be made by the
Member States is available on the website of the European
Commission, http://ec.europa.eu/internal_market/
financial-markets/derivatives/notifications/index en.htm
162 Article 12 (2) 2' d paragraph of Regulation (EU) No
648/2012
163 Belgian law of 25 April 2014 available on http://www.
ejustice.just.fgov.be/mopdf/2014/05/28_2.pdf#Page221
AL B - Bulletin Droit et Banque IT 54 Dcembre 2014
Articles de fond
not complying with the requirements under EMIR.
However, there is currently 164 no formal draft bill
implementing penalties for breaches of the EMIR
provisions available.
ii) Application of existing sanctions provi-
sions
As a result, and for the time being, the CSSF is only
entitled to impose sanctions to undertakings subject
to its supervision on the basis of existing legisla-
tion'" Therefore credit institutions, professionals
of the financial sector within the meaning of the
Law of 5 April 1993 on the financial sector, alter-
native investment fund managers 166, undertakings
for collective investment, authorised securitisation
undertakings, SICARs and other institutions 167 are
subject to the supe rv ision of the CSSF regarding
their respective implementation of and compliance
with the provisions of EMIR. These legal persons
subject to the supe rv ision of the CSSF and the
natural persons in charge of their administration or
management may be sanctioned in the event of non-
compliance with applicable laws and regulations168.
Consequently, violation of the EMIR provisions by
these persons might trigger the application of sanc-
tions currently applicable in accordance with exist-
ing legislation. The penalties that the CSSF may
impose in this respect can vary from a warning or
a reprimand to a fine of between 250 and 250,000
euros, but can also consist in a temporary or defini-
tive ban from performing one or several activities,
as well as any other restrictions to the activities of
the persons or entities concerned 169 . There is, there-
fore, a sanction regime that the CSSF might use to
ensure the implementation of the reporting obli-
gation under EMIR. The only market pa rt icipants
that might currently not be exposed to any sanction
from the CSSF, in the absence of specific sanctions
under EMIR, are non-financial counterparties, if
they are not supervised by the CSSF. This situation
might last until the new sanction framework is ad-
opted by the Luxembourg legislator.
In conclusion, falling within the scope of application
of EMIR and the implementation of the necessary
contractual and operational arrangements to ensure
164 On 15 September 2014
165 Notably, Articles 2 and 2-1 of the Law of 23 December 1998
establishing a financial sector supervisory commission, as
amended, and, Article 63 of the Law of 5 April 1993 on the
financial sector, as amended.
166 authorised under the Law of 12 July 2013 on alternative
investment fund managers.
167 See Article 2 (1) of the Law of 23 December 1998
establishing a financial sector supervisory commission, as
amended, for a full list of the entities concerned
168 Article 63 (1) of the Law of 5 April 1993 on the financial
sector, as amended
169 Articles 2-1 (3) of the Law of 23 December 1998
establishing a financial sector supervisory commission, as
amended, and, Art icle 63 (2) of the Law of 5 April 1993 on
the financial sector, as amended.
55
Articles de fond
compliance with its provisions, notably regarding
the reporting obligation, are challenges for all play-
ers of the Luxembourg financial sector involved in
the derivatives market. However, even if this piece
of legislation is complex in terms of layers of appli-
cable provisions and of regulatory guidelines, there
are solutions available or to be developed in terms
of provision of services in Luxembourg to ensure
compliance with these new rules. As a result, actors
of the Luxembourg financial sector need to adapt
56
their contractual and operational arrangements, or
create new ones to face the requirements of this
changing and more demanding legislation. Regard-
ing the changes implied by EMIR, the reporting
obligation was one step ahead; the clearing obliga-
tion is the next one. A quote from John F. Kennedy,
himself making a reference to Goethe, summarises
very well the situation: "Change is the law of life.
And those who look only to the past or the present
are certain to miss the future"10
170 Address in the Assembly Hall at the Paulskirche in
Frankfurt, 25 June 1963
Al j i - Bulletin Droit et Banque N 54 - Dcembre 2014