The guidance provided by each jurisdiction is below:
Canada
Depending on the product being reported and the related market convention, a multi-leg or multi-stream product could be reported using a particular data element more than once. Unless the data element is listed as “leg”, it cannot be reported more than once. For products where the multi-leg or multi-stream concept is not applicable, report values in the designated data element for the first leg (Leg 1) for all fields that are specified as leg-based data elements. For products having two legs where one leg references a fixed value and the other leg references a floating value, Leg 1 elements should refer to the leg that references a fixed value and Leg 2 elements should refer to the leg that references a floating value. For products having two legs where each leg references a floating value respectively, the legs should be ordered based on the alphabetical ordering of the names of the respective underliers. In cases where the names of the respective underliers are the same, but they are differentiated by a tenor, Leg 1 elements should refer to the leg referencing the underlier with the shorter tenor.
Note: For IR, most of the industry has not implemented alphabetical ordering, but the EMIR approach.
EMIR
Article 9 of EMIR – ‘Leg 1’ and ‘Leg 2’ fields Which leg of the transaction should be assigned to the ‘Leg 1’ field and which one to the “Leg 2”? TR Answer 27 As these fields are included in the Table 2 as Common data, counterparties are expected to agree a consistent approach to assigning each leg to the respective field in the report. Lack of agreement would lead to reconciliation problems at the TR level. The obligation to agree the reports content stems from the requirement of Article 9(1) of EMIR, ‘counterparties and CCPs shall ensure that the details of their derivative contracts are reported without duplication’ and is specified in the European Commission’s Frequently Asked Questions document Section II Question 5: http://ec.europa.eu/internal_market/financial-markets/docs/derivatives/emir-faqs_en.pdf
ISDA Best Practice: TR's will cross-match leg 1 and leg 2 details. As a result it is not necessary for counterparties to agree on a leg alignment best practice.
ASIC
|
Product type |
Leg 1 definition |
|
CO single-commodity swap: fixed price or parameter vs floating price |
Leg 1 is the leg of the CO fixed price or parameter |
|
CO single-commodity swap: fixed price or parameter or total return swap vs an interest rate |
Leg 1 is the leg of the CO risk returns |
|
CO multi-commodity swap |
Leg 1 is the leg of the commodity underlier which is the ‘Base Product’ (and not the ‘Other Base Product’) in the UPI Reference Data for the UPI reported |
|
EQ swap: fixed price or parameter vs floating price |
Leg 1 is the leg of the EQ fixed price or parameter |
|
EQ swap: fixed price or parameter or total return swap vs an interest rate |
Leg 1 is the leg of the EQ risk returns |
|
FX CFDs, forwards and swaps |
The data elements fully explain the direction of Counterparty 1 in relation to each currency, and the currencies may be reported in any order |
|
IR single currency swap: fixed rate vs floating rate |
Leg 1 is the leg of the fixed rate |
|
IR single currency swap: fixed rate vs fixed rate |
Leg 1 is the leg with higher fixed rate, or if both legs have the same fixed rate, Leg 1 is the leg with the shorter calculation period, or if both legs have the same calculation period, Leg 1 is the leg whose day count convention code appears first when sorted alphabetically |
|
IR single currency swap: floating rate vs floating rate |
Leg 1 is the leg of the reference rate underlier which is the ‘Reference Rate’ (and not the ‘Other Leg Reference Rate’) in the UPI Reference Data for the UPI reported |
|
IR cross-currency swap: fixed rate vs floating rate |
Leg 1 is the leg of the fixed rate |
|
IR cross-currency swap: fixed rate vs fixed rate |
Leg 1 is the leg with higher fixed rate, or if both legs have the same fixed rate, Leg 1 is the leg with the shorter calculation period or Leg 1 is the leg of the notional currency code which appears first when sorted alphabetically |
|
IR cross-currency swap: floating rate vs floating rate |
Leg 1 is the leg of the reference rate underlier which is the ‘Reference Rate’ (and not the ‘Other Leg Reference Rate’) in the UPI Reference Data for the UPI reported |
|
IR debt security or debt index total return swap |
Leg 1 is the leg of the IR debt risk returns |