The European Market Infrastructure Regulation (EMIR) deadline for reporting derivatives trades is looming large. Tomorrow—February 12, 2014—all parties involved in derivatives transactions in Europe must begin reporting the transactions to trade repositories on a daily basis. EMIR covers a wide range of transactions, including foreign exchange (FX), interest rate, commodity, credit, and equity derivatives, as well as some instruments Dodd-Frank doesn't cover, such as FX forwards. And the rule applies to both financial institutions and their corporate clients.

“Buy-side firms will be deeply impacted by the arrival of EMIR, as the onus to report derivatives trades will be shared by both the sell-side and the buy-side,” says Rob Friend, global head of fixed income product for Bloomberg. “This will have a significant impact on their business processes, operations, and returns for their investors.” In fact, Anthony Kirby, executive director and head of regulatory reform for capital markets and asset management in the risk and regulation division of EY's financial services practice, has estimated that the costs associated with EMIR reporting could, at the extreme end of the spectrum, add two to three basis points to asset managers' cost-income ratios over the next few years.

“That's a main difference between Dodd-Frank and EMIR—that under EMIR both sides have to report their transactions,” emphasizes Guenther Peer, regional vice president, solutions consulting EMEA, for treasury and risk management software vendor Reval. “Intragroup transactions also have to be reported. If a U.S. multinational is trading with a European bank, there's not too much that needs to happen because the bank is going to report their side of the trade. But if a U.S. corporate has a subsidiary based in the EU [European Union], then the subsidiary needs to comply with EMIR.”