Upcoming CME closures pressure unprepared firms

By Emma Olsson | 13 November 2020

Firms are running out of time to switch reporting platforms and trade repositories (TR) as the closure date for CME Group’s NEX/Abide looms.

“Certainly there is no extension past November 30 for the NEX Abide Regulatory reporting and trade repository and firms should have migrated by now,” said Philip Flood, chief commercial officer at Inforalgo, a Gresham Technologies Company in an email.

CME Group announced in May that it would be winding down its NEX regulatory reporting services as well as its European and Australian TRs by November 30. Coming at a time of great market upheaval from the pandemic, the closures came as a surprise to firms relying on CME’s services.

CME Group declined to comment on the state of the transition or how it was assisting firms in their migration.

The announcement of the closures also came at a difficult time for firms preparing for reporting under the Securities Financing Transactions Regulation (SFTR), which went live in July for sell side firms in July. According to Flood, the switch had an “additional burden” as firms may have had to go live with CME and migrate to another service straight away.

CME’s reporting services account for 38 percent of the global volume market share and is responsible for roughly 40 percent of global trade reporting, according to Cappitech figures, meaning hundreds of CME clients will need to find a new vendor. The switching process involves changing reporting formats, validation rules and handling of personal data, as well as the legal requirements of procuring a new reporting vendor or TR.  

“The main challenge is the migration of data from the TR. The European Market Infrastructure Regulation (Emir) requires a full history of open and closed positions so it a huge amount of data to export and import considering it went live in 2014, six years’ worth of data to accurately move,” said Flood.

Another challenge for firms is the rising cost of regulatory reporting for Emir, SFTR and the second Markets in Financial Instruments Directive (Mifid II), said Flood. Also the market for tech providers is changing shape.

“There are less end-to-end reporting options available for clients to choose from which could mean reporting solutions are less competitively priced,” said Flood.

The European regulator has aimed to assist remaining firms seeking transition. In a reference to the upcoming closures, the European Securities and Markets Authority (Esma) announced on Monday that it would assist in the “smooth winding down plans of any trade repository withdrawing its registration.”

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