ESMA publish new EMIR Q&A – 23 June 2014

ESMA published new Q&A today including details on reporting collateral and valuation, OTC novations, terminations and notional amounts . Highlights of the Q&A include:

Collateral – ESMA makes it clear that collateral should be reported as a single value in a single currency. ESMA explains that this should be reported as the total market value posted by the counterparty responsible for the report – i.e. the value before any haircut or fees are imposed by the receiver. ESMA also explains that the collateral reported should be just the collateral that covers the exposure related to the reports made under EMIR (if possible). The reporting start date for collateral and valuation is the 11th August with the first reports due no later than the end of 12th August (reflecting collateral and valuation for 11th August). Explicit guidance is also provide for the population of the ‘collateralisation’ field (i.e. definitions of ‘uncollateralised’, ‘partially collateralised’ , ‘one-way collateralised’ and ‘fully collateralised’).

Valuation  - The mark to market value for centrally cleared derivatives should be based on the end of day settlement price of the market or CCP and should represent the absolute value of the contract.

OTC Derivative Novations – ESMA confirms that the original bilateral trade should be terminated (marked as cancelled) and the new beta trade reposted against the ‘new’ counterparty.