FCA consults on FX swap reporting

The FCA and the BoE have launched a consultation to seek feedback from the industry to clarify two questions for counterparties reporting derivatives transactions under EMIR, including the definition of FX swaps.

The consultation comes in response to issues identified by market participants. One of the questions aims to determine what FX swaps mean for reporting purposes, as the term is used interchangeably to describe either a single FX swap contract or two FX forward contracts.

The rules prescribe that reporting counterparties to trades composed of a combination of derivatives contracts should agree how many reports need to be submitted to regulators, considering a number of factors including its execution, confirmation and settlement.

The draft sets out a scenario where reporting of these contracts will depend on how counterparties conclude the trade, meaning that two FX forward contracts that have been negotiated together should be reported in two separate reports, while FX swaps should warrant just one.

For scenarios where the near leg is an FX spot contract and far leg is a forward, only one report should be submitted, while no reports are required if both legs are spot trades.

The consultation is open until Friday September 12 and the FCA expects the finalised Q&As to be published in October.