Question:
For Packages reporting, particularly for whether or not a trade needs to be broken up into components (“decomposed”), firms have historically had different interpretations of what is reported as a package in several reporting jurisdictions. Although the industry continues to work on establishing a standard approach for package reporting (also with an eye on other regimes like EMIR), we believe there will be differences in the way packages are reported at the December 5, 2022 go-live phase.
CFTC Feedback:
ISDA/industry members raised awareness to CFTC Staff that under EMIR reporting, there have been issues with decomposition and linkages of components for packages across asset classes, and although the industry is working together to find a standardized approach for reporting (across jurisdictions including for CFTC and EMIR), there will be differences in the way packages are reported at the December 5, 2022 go-live phase.
Question:
For physically settling FX swaps reported as a package, is it CFTC’s expectation that spread be a reported as a package transaction price #47 or package transaction spread #50?
Note: ASIC has provided guidance in its consultation that these would be reported as package transaction spread.
CFTC Feedback:
CFTC Staff conveyed that they do not have any guidance; they were amenable to the industry going with the industry consensus that is able to be formed on this point after review of the relevant CFTC rules and definitions.
CFTC staff also encouraged ISDA and its members to offer information or suggest clarifying changes in the CDE response as applicable, even if it is not a specific question in the consultation.
Should option strategies be reported as packages?
Yes.
Each put and call leg should be independently reported with their own UTI and a package identifier to link them.
Per tech spec footnotes:
To report a collar, this field should be populated to link the cap and floor legs. To report a straddle, this field should be populated to link the payer swaption and receiver swaption legs.
What should be reported as a package?
Per tech spec footnotes:
In addition, a “package transaction” also includes a transaction involving two or more instruments: (1) that is executed between two or more counterparties; (2) that is priced or quoted as one economic transaction with simultaneous or near simultaneous execution of all components; (3) where the execution of each component is contingent upon the execution of all other components; (4) where each component is assigned a Unique Swap Identifier (USI) or Unique Transaction Identifier (UTI); and (5) each component is reported separately.
What if I don't have a package price?
Package transaction price: Default value with all 9’s, for any of the allowable formats, is accepted when the value is unknown. When [Package transaction price notation] = ‘1’ use “99999.9999999999999” (18 numerical characters including 13 decimal places). When [Package transaction price notation] = ‘3’ use “9.9999999999” (11 numerical characters including 10 decimal places).