There is nothing really new to report from Switzerland on the issue of FinfraG. Although the legislation has been promulgated, the Swiss are obviously taking their time with the implementation, suggesting that the starting date for the reporting obligation is likely to be postponed further. From today's point of view, the competent authority, FINMA, expects the reporting obligation to come into force "in 2017".

The so-called Level 2 Validation Rules came into effect on November 1, 2015. The key purpose of these rules is to increase the reconciliation quota. Since November 1, 2015, trade repositories are required to reject all notifications which do not comply with these rules. We have successfully tested this in the case of REGIS-TR. It remains to be seen however how DTCC in particular reacts.

If you report on the basis of EMIR and you have counterparties which report to DTCC, you will probably already have noticed that DTCC sometimes sends reconciliation data which have not even been reported by the relevant market players. Besides the fundamentally poor data quality in some cases, performance such as this will ensure that the reconciliation ratio continues to be a low single-digit percentage.

Our service, EMIRate, has been compliant from Day 1 and our clients have not even noticed the changes.

We often receive enquiries from corporates regarding which countries (in which these corporates are also present) already have or plan to introduce regulations similar to EMIR, particularly in connection with a reporting obligation for group-internal derivative transactions. Given that, as far as we are aware, no simple overview exists for the entire G20 region, we decided to roll up our sleeves and prepare one ourselves. Click on the following link for the results http://www.emir-ate.com/en/facts/g20.html. This is a simple overview with a focus on the reporting obligations for NFCs. As far as was possible, we have set up comprehensive collections of related documents (laws, comments, ordinances, etc.) for all of the relevant countries. In the event that you are interested in accessing these, please feel free to contact us.

Although we received nearly no information from countries such as China or Saudi Arabia (probably not so important for corporates), the overview of the other countries is already relatively complete. What will probably interest you most is the fact that, with the exception of Canada and to some extent Switzerland, Singapore and the United States, there are no reporting obligations for NFCs (even in theory). Probably for reasons of simplicity, Canada has borrowed heavily from EMIR, albeit so far without introducing limitations for NFCs such as those decided upon in Switzerland, for example.

Although we have invested a huge amount of time preparing these overviews, we do not claim that they are entirely complete. If you have any experience or information regarding specific countries, we would love to hear from you.

EACT (European Association of Corporate Treasurers) immediately issued a statement in response to this report. The most important proposals made by EACT from the point of view of corporates relate to the abolishment of the dual-sided reporting when there is also an obligation for the FCs to report for their NFCs as well as the complete abolishment of the reporting of intra-group transactions.

Both issues however are regulated in the legislation itself and not in ordinances, meaning that this would require an amendment to the law.

After the literally last-minute decision not to report group-internal transactions in Switzerland, you would think that the issue of reporting obligations for corporates was over once and for all. On closer inspection however, a de facto reporting obligation remains for derivative transactions between Swiss corporates and foreign banks given that it cannot be automatically assumed that foreign banks, which may already report under Dodd-Frank and EMIR, would now also make FinfraG reports. In practice, this would mean the following for corporates resident in Switzerland: The identification of all those transactions which have to be reported under FinfraG, the modification of systems (and/or delegation of the reporting to third parties), and reporting. Theoretically at least there would also be the option of making a FinfraG report on the basis of EMIR, for example. In terms of the system, this would make things simpler but would be subject to the recognition of EMIR as being equivalent to FinfraG. Given that both the law and the draft of the ordinance are based on EMIR in many respects and EMIR is even explicitly mentioned, we regard this as highly probable.

The ordinance associated with FinfraG (FinfraV) is currently under review until October 2, 2015. The third quarter of 2016 has been provisionally defined as the start for the reporting obligation.

EMIR prescribes that ESMA regularly reports to the European Commission on its experiences with EMIR. ESMA has recently done this with a focus on NFCs for the first time. It is not surprising that the volume of derivatives traded by NFCs is minimal in relation to the overall volumes traded. Although the actual volume is probably higher given that several countries, for example, do not report any FX forward transactions and swaps, this won't have any impact on the fact that the volume is negligible in comparison.

We nonetheless find it somewhat comforting, if it is true, that the volume of traded commodity derivatives is higher in the case of the NFCs than that of the FCs.

Total confusion prevails however due to a section in the report in which ESMA comes to the conclusion that it would be too much of a financial burden for NFCs to determine whether a derivative relates to a hedge transaction or one with a speculative purpose. This statement displays a complete lack of understanding about the actual situation of corporates and culminated in the announcement that it now proposes to the European Commission to waive the classification ‘Directly linked to commercial activity or treasury financing’ in as far as NFCs can report all of their trades as ‘Not linked’. Will corporate treasurers perform the Mexican wave just because of this enormous relief?

The fiasco (the only fitting description for it) associated with the announcement of the so-called reconciliation of derivative trade reporting under EMIR, both internally and between different trade repositories, has led to ESMA introducing additional validation rules with effect from November 1, 2015.

Probably the most inconvenient change for corporates is that, once these rules have come into force, it will no longer be possible to report derivatives without a unique trade ID (UTI) reconciliated with the counterparty and to use a so-called interim trade ID instead. This change also has an impact on the systems used for reporting purposes. Until now it was simple to report an interim trade ID if no UTI was available; now, however, transactions without a UTI will have to be ‘put on ice’ or excluded from the reports until such time as a UTI is available. It sounds easy but may well not be in some cases.