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- EMIR (EU)
Should Leg 2 fields be populated for non rates products?
Question:
should the validation rules for Leg 2 fields (2.95-2.110) be changed to allow for them to be populated for non-rates products? This would allow 'Directly of Leg 1' to represent the equity / commodity underlier and 'Direction of Leg 2' to represent the funding leg.
Validation Rules only allow for the funding leg of a non-Rates trade to be populated in the Leg 1 fields for fixed rate and floating rate. The fixed rate Leg 2 / floating rate Leg 2 fields can only be populated when the asset class is 'INTR'.
Therefore, the details of the fixed rate / floating rate leg of non-Rates swap trades (e.g. equity swaps and commodity swaps) must be report details in the Fixed Rate Leg 1 field (2.79-2.82) / Floating Rate Leg 1 fields (2.83-2.94).
This will impact how Direction of Leg 1 and Direction of Leg 2 fields are populated. Using an equity swap as an example, the normal market practice is to consider the leg with the equity underlier as 'leg 1'. However, as identified above, the funding leg (fixed / floating rate leg) would be populated in the Leg 1 fields of the EMIR report.
Therefore the leg with the equity underlier will presumably be considered Leg 2 for reporting.
Answer:
Field 2.95 and Field 2.101 have been amended removing the annotation 'otherwise the field shall be left blank'.