Summary of CySEC's Circular C461
Memo #35-2021
CySEC Circular No: C461
Date: 30/07/2021
Subject: Reporting under Regulation on OTC Derivatives, Central Counterparties and Trade Repositories (‘EMIR’) - zero net positions
Purpose: To inform Regulated Entities about divergent market practices that have been observed in reporting under EMIR in the specific scenario of zero net positions.
In Summary:
CySEC has issued the Circular C461 on 30/07/2021 to bring to the attention of Cyprus Investment Firms, UCITS and Management Companies, Alternative Investment Funds managed by AIFMs and Non-Financial Counterparties, that divergent market practices have been observed, at EU level, with regards to reporting under EMIR in the specific scenario of zero net positions.
In accordance with this Circular C461, those practices, inter alia, include:
A. Termination of the position and reporting of a new one using a different UTI at a later stage. No valuations are reported between the termination of the first position and the creation of the latter.
B. Maintaining the position open and reporting a zero contract value on a daily basis.
C. Maintaining the position open without reporting the contract value on a daily basis.
D. Exiting the position without reporting a termination.
E. Termination of the position and reviving (reopening) it later using the original UTI.
It is noted that out of the identified options, only A and B are in line with the regulatory framework under EMIR, where option C does not meet the requirement to send daily valuation for all outstanding derivatives, option D results in a failure to report termination of a derivative leading to a derivative that remains open in the TR’s records but does not receive daily valuations and other relevant modifications and option E does not satisfy the requirement to identify a derivative with a Unique Trade Identifier (UTI).
This Circular C461 provides reference for each option to the article of the relevant regulatory framework.
It is further noted that the requirements and guidance for these options are not expected to change under EMIR REFIT Final Report.
The EMIR REFIT Final Report can be found on the following link:
