Q&A: Trade reporting for Alternative Investment Funds (AIFs)

A number of interesting questions were raised in the webinar, some of which we did not have time to cover on the call. A brief summary of the Q&As is below.

Q1. Backloading of reporting. Could you confirm whether this needs to be done once the AIFM becomes AIFMD authorised?
A1. FCA’s view on this is that only trades which are outstanding on the date of AIFM authorisation need to be reported (within 1 day of the AIFM authorisation date). As such, from a UK perspective, there is no requirement to backload historic trades (ie trades which are not outstanding on the AIFM authorisation date). (ESMA has yet to express a view on this and so may be subject to further clarification.) Note that it is the AIF that has the obligation to report and not the AIFM.

Q2. Extended Transitional. If an AIFM is not authorised on 22 July, what is the position on reporting during the interim period between 22 July and the date of actual authorisation?
A2. Technically, the reporting obligation for non-EU AIFs is the AIFM authorisation date itself (ie the date on which the AIFM is actually authorised), as it is only on that date that the non-EU AIFs become recategorised as Financial Counterparties. As such, there would not be a requirement to report pre-emptively in the interim period before authorisation. (This may be subject to further clarification from ESMA/FCA.)

Q3. ETDs. For listed futures, who is the counterparty that reports the other side of the trade? Are we facing the exchange or the broker we've executed through?
A3. Please refer to ETD Reporting Answer 2 to the ESMA Q&As and in particular the scenario-based examples. The answer turns on whether there is an investment firm acting as counterparty to the AIF and trading on its own account or on the account of, and on behalf of, the AIF.

Q4. Collateral Reporting. Is it collateral posted or received that needs to be reported and should this take haircuts into account?
A4. Collateral reports should relate to collateral posted (not received) by the reporting party and cover both initial margin and variation margin. Collateral ‘in transit’ should be included in the report.

Q5. Clearing timeline. What are the current likely deadlines for mandatory clearing?
A5. The frontloading period has commenced and public consultations on the clearing obligation should be published this summer. The likelihood is that the first clearing obligations will commence in H1 next year

Q6. Mandatory Clearing. Do we have any clarity on what classes of OTC derivative are likely to be subject to mandatory clearing and how do we keep track of this?
A6. ESMA maintains a public register of all CCPs that are authorised under EMIR and the classes of derivatives that they have been authorised to clear. This is a good indicator of the kinds of derivatives that will be considered for eligibility for mandatory clearing. There will be a public consultation on the classes of derivatives which might be subject to mandatory clearing.

If you have any further queries arising out of the session or on trade reporting or EMIR more generally, please do not hesitate to contact one of the speakers who would be delighted to discuss in more detail.

This information and any accompanying material is intended for information purposes only. It does not contain definitive advice or guidance and neither CME Group nor Simmons & Simmons LLP assumes any responsibility for the accuracy of this information or for any errors or omissions.

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