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 Europemust begin reporting the transactions to trade repositories on adaily basis. EMIR covers a wide range of transactions, includingforeign exchange (FX), interest rate, commodity, credit, and equityderivatives, as well as some instruments Dodd-Frank doesn't cover,such as FX forwards. And the rule applies to both financialinstitutions 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 thesell-side and the buy-side,” says Rob Friend, global head of fixedincome product for Bloomberg. “This will have a significant impacton their business processes, operations, and returns for theirinvestors.” In fact, Anthony Kirby, executive director and head ofregulatory reform for capital markets and asset management in therisk 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 pointsto asset managers' cost-income ratios over the next few years.

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