EMIR
Trade Repositories (TRs) have now started giving reporting entities feedback on
their pairing and matching status in the form of an end of day report in
respect of the new EMIR
Refit.
Brokers
need to be aware of this process and ensure that their regulatory reporting
team (or external provider) is:
· Attending
to these reports which come from the TR each day,
· Identifying
which counterparties are included in the report as also having a reporting
obligation (especially where you had not previously conducted an exercise of
preparing for the pairing and matching requirement),
· Understand
why there are mis-matches in paired transactions,
· Liaising
with counterparties to align the relevant fields to prevent mis-matches
re-occurring, and
· Making
changes to the reporting systems and processes where necessary.
Lets us explore the pairing and matching process undertaken by the LSEG Regulatory
Reporting TR.
What Is Pairing and Matching?
Pairing is the process
where the TR identifies and pairs the two sides of the same
transaction using the following fields:
·
Unique
Transaction Identifier (UTI),
·
Counterparty
1; and
·
Counterparty
2.
Matching is the process
the TR does (after successful pairing) to match certain fields of the 2
reported sides of a trade.
Once the trades are paired, you will be
able to see the values your counterparty reported that didn’t match (see
example below).
How Does Pairing and Matching Benefit a Firm?
Pairing
and matching is great when it works, as it allows a firm to see what values
their counterparty has reported. This allows a kind of real time audit and
reconciliation between the 2 parties so that if one party gets a value wrong,
hopefully their counterparty will get it right. The parties will then engage in
dialogue on their conflicting data values and improve their process in near
real time.
What Are the Relevant Fields and Do Hey Need to Match Exactly?
Firstly,
the TR doesn’t necessarily try to pair every trade. The pairing is only
attempted if the field ‘Reporting obligation of counterparty 2’ is set
to ‘TRUE’.
Secondly,
whilst there is pairing between TRs in the same jurisdiction, there is
currently no formal pairing across jurisdictions, i.e. a trade done by an EU
investment firm with a UK investment firm will not be paired.
There
are a total of 89 fields that are eligible for reconciliation but a lot of them
are only relevant to certain asset classes or trading venues.
Some
fields have reconciliation tolerances to allow for different timing and
rounding and other factors that may result in a different value from each
counterparty being ‘normal’.
Brokers
should make sure they are attending to these pairing and matching reports each
day. Review the recommended action items
above and make sure you understand where your reporting standards need to get
to. Ensure that there is a clear record
of constant improvement in your arrangements with counterparties to make sure
that mismatches in reporting are rare, rather than systemic.
EMIR
Trade Repositories (TRs) have now started giving reporting entities feedback on
their pairing and matching status in the form of an end of day report in
respect of the new EMIR
Refit.
Brokers
need to be aware of this process and ensure that their regulatory reporting
team (or external provider) is:
· Attending
to these reports which come from the TR each day,
· Identifying
which counterparties are included in the report as also having a reporting
obligation (especially where you had not previously conducted an exercise of
preparing for the pairing and matching requirement),
· Understand
why there are mis-matches in paired transactions,
· Liaising
with counterparties to align the relevant fields to prevent mis-matches
re-occurring, and
· Making
changes to the reporting systems and processes where necessary.
Lets us explore the pairing and matching process undertaken by the LSEG Regulatory
Reporting TR.
What Is Pairing and Matching?
Pairing is the process
where the TR identifies and pairs the two sides of the same
transaction using the following fields:
·
Unique
Transaction Identifier (UTI),
·
Counterparty
1; and
·
Counterparty
2.
Matching is the process
the TR does (after successful pairing) to match certain fields of the 2
reported sides of a trade.
Once the trades are paired, you will be
able to see the values your counterparty reported that didn’t match (see
example below).
How Does Pairing and Matching Benefit a Firm?
Pairing
and matching is great when it works, as it allows a firm to see what values
their counterparty has reported. This allows a kind of real time audit and
reconciliation between the 2 parties so that if one party gets a value wrong,
hopefully their counterparty will get it right. The parties will then engage in
dialogue on their conflicting data values and improve their process in near
real time.
What Are the Relevant Fields and Do Hey Need to Match Exactly?
Firstly,
the TR doesn’t necessarily try to pair every trade. The pairing is only
attempted if the field ‘Reporting obligation of counterparty 2’ is set
to ‘TRUE’.
Secondly,
whilst there is pairing between TRs in the same jurisdiction, there is
currently no formal pairing across jurisdictions, i.e. a trade done by an EU
investment firm with a UK investment firm will not be paired.
There
are a total of 89 fields that are eligible for reconciliation but a lot of them
are only relevant to certain asset classes or trading venues.
Some
fields have reconciliation tolerances to allow for different timing and
rounding and other factors that may result in a different value from each
counterparty being ‘normal’.
Brokers
should make sure they are attending to these pairing and matching reports each
day. Review the recommended action items
above and make sure you understand where your reporting standards need to get
to. Ensure that there is a clear record
of constant improvement in your arrangements with counterparties to make sure
that mismatches in reporting are rare, rather than systemic.
This post is originally published on FINANCEMAGNATES.
