ESMA: “room for improvement” in supervision of derivatives data under EMIR

The European Securities and Markets Authority (ESMA) has published the results of a peer review it conducted into supervisory actions of six National Competent Authorities (NCAs) regarding their approaches for enhancing the quality of derivative data reported under the European Market Infrastructure Regulation (EMIR).

This peer review complements ESMA’s Data Quality Action Plan (DQAP) in order to further improve the quality and usability of derivatives data.

The review was targeted at those six NCAs who supervise important derivative markets in the European Union (EU) and have key counterparties reporting their derivative trades to EU Trade Repositories (TRs), namely:

  • the Netherlands Authority for the Financial Markets (AFM);
  • the French Authority of the Financial Market (AMF);
  • the German Federal Financial Supervisory Authority (BaFin);
  • the Central Bank of Ireland (CBoI);
  • the Cypriot Securities and Exchange Commission (CySEC); and
  • the UK Financial Conduct Authority (FCA).

In addition, ESMA was reviewed in its role as direct supervisor of TRs.

Steven Maijoor, Chair, said in a statement: “This targeted review shows that there is still significant room for improvement when it comes to regulators’ supervision of the reporting and effective use of derivatives data. While being a complex reporting regime, only consistently high-quality data reported by counterparties enables regulators to identify systemic and counterparty risk.

“This review provides for an important road-map on how to further consolidate and improve NCAs’ supervisory actions to enhancing the quality of derivatives data. ESMA will follow up on the findings of this peer review with the concerned national regulators.”

The peer review assessed how the six NCAs supervised data quality under EMIR in the following areas:

  • NCAs’ supervisory approach to EMIR data quality;
  • Integration of EMIR data within the NCA’s overall supervisory approach; and
  • NCAs’ access, assessment and analysis of EMIR data quality.

The review delivered mixed results for the six NCAs. The majority of NCAs had a supervisory approach to EMIR data quality in place. However, two NCAs lagged behind when it comes to integrating EMIR data quality controls into their overall supervisory approach, which negatively impacted the NCAs’ ability to access, assess and analyse EMIR data.

The review also identified good supervisory practices by the six Authorities. These good practices should be considered by all NCAs and, where appropriate, incorporated into existing supervisory approaches. ESMA has also put forward several initiatives to improve the supervision of EMIR’s data quality in the short and long-term. The short-term initiatives include: revising NCAs’ annual Data Quality Review exercises and identifying how NCAs can regularly use the data as part of their overall supervisory approach.

Read the full release

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