HSBC, RBS and SG to offer delegated reporting

The trio join five other banks in offering to report clients' trades to a trade repository on their behalf

Royal Bank of Scotland, HSBC and Société Générale are the latest dealers to confirm that they will offer delegated trade reporting services to their clients in time for the start of mandatory reporting in Europe on February 12.

The trio join BNP Paribas, Citi, Credit Suisse, Lloyds and UBS, which have all confirmed they will offer to report their counterparty's side of the trade direct to a trade repository. Barclays and Nomura are still considering providing the service, while Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs and JP Morgan decline to comment.

James Harvey, assistant treasurer at Rolls Royce in London, welcomes the news: "I personally think the banks are in a much better position to do the job, given that they'll be doing it anyway. They have the systems, the people and the capability, so it seems like the most sensible option."

The European Market Infrastructure Regulation (Emir) requires both the dealer and the counterparty of exchange-traded and over-the-counter derivatives trades to report transaction data to a registered trade repository from February 12. But the regulation allows non-dealer counterparties to delegate their reporting responsibilities to a third party – usually the dealer counterparty or a dedicated outside service such as MarkitServ – which allows end-users to avoid building expensive trade reporting systems.

Hurdles remain, however. While an end-user can hand off the reporting to a third party, Emir states that the user retains the ultimate responsibility for the trade to be correctly reported. Dealers have not been willing to indemnify clients against any regulatory sanctions or reputational damage should trades not be correctly reported, which has meant a number of end-users have decided instead to set up systems to report their own trades direct to a trade repository.

I personally think the banks are in a much better position to do the job, given that they'll be doing it anyway

But dealers aren't budging. RBS's delegated reporting agreement, available online, says the bank will report client trades "on a reasonable efforts basis and without liability for any loss, cost, charge, fee, expense, damage or liability, including, for the avoidance of doubt, any regulatory penalty or fine, loss of profit, revenue, business or goodwill (whether direct or indirect) resulting from any act or omission made in connection with this Agreement, other than to the extent arising directly from our gross negligence, wilful default or fraud".

In addition, the International Swaps and Derivatives Association and the Futures and Options Association earlier this week published a standard Emir reporting delegation agreement, which limits banks' liability to gross negligence, fraud and wilful default.

Dealers believe this approach is fair. "Our view is we're offering a free service, and we'll be giving customers information that allows them to check what's being reported on their behalf. The sense we get from the regulators is that if customers are checking that and correcting it promptly, then that's what they would expect. Anything that is obviously grossly negligent on our behalf is covered in the document as something we would have liability for," says a regulatory expert at one of eight banks offering the service.

For some corporates, the risk is one worth taking. A treasurer at one large UK company says it will be using dealers' delegated reporting service, noting that while there is a small risk that the trade will be incorrectly reported, they will be able to double check the information that banks send to trade repositories.

"We're in a position where we've got to report these trades somehow, and as it's not easy to do it ourselves. I guess the least worst option is to allow the banks to do it and take that risk," says the treasurer. "I don't see it as a large risk because the banks have to make sure they're reporting their own trades correctly, so they should have the incentive to not make a mistake. Also we can check what's being reported, and if it's wrong we can highlight it."