Portfolio reconciliation is the regular comparison by two counterparties of the key terms and valuations of their uncleared over-the-counter (OTC) derivatives, to find and resolve discrepancies early. EMIR sets its frequency by portfolio size, from daily for 500 or more trades between financial counterparties to quarterly for small portfolios.
ReconciliationReconciliation is the regular comparison of two sets of records that should agree, such as a firm's securities positions and the custodian's statement, cash ledgers and bank statements, or trade details with a counterparty, followed by investigation of differences (breaks). It is a key control in operations and finance.
Break (reconciliation break)A break is a difference found when two records that should agree are compared, such as a firm's securities position against the custodian's statement, or a trade against the counterparty's confirmation. Breaks are classified by cause and age, investigated, corrected at source and escalated when they stay open.
Portfolio compressionPortfolio compression is a process in which two or more counterparties tear up offsetting derivative trades and replace them with fewer new trades of smaller total notional, keeping the net market risk unchanged. The European Market Infrastructure Regulation (EMIR) requires firms with 500 or more uncleared trades with one counterparty to analyse compression at least twice a year.
EMIR (European Market Infrastructure Regulation)The European Market Infrastructure Regulation (EMIR), Regulation (EU) No 648/2012, sets EU rules for over-the-counter derivatives, central counterparties and trade repositories. It imposes clearing of standard derivatives, risk mitigation (confirmation, reconciliation, margin) for uncleared ones and reporting of all derivatives; EMIR 3 (2024/2987) added the active account requirement.
Trade confirmationA trade confirmation is the document or electronic message in which the parties to a trade agree its economic and legal terms. For uncleared over-the-counter (OTC) derivatives the European Market Infrastructure Regulation (EMIR) requires timely confirmation, by the business day after trade for most financial counterparties, and procedures to resolve unconfirmed trades and disputes.
EMIR (European Market Infrastructure Regulation)The European Market Infrastructure Regulation (EMIR), Regulation (EU) No 648/2012, sets EU rules for over-the-counter derivatives, central counterparties and trade repositories. It imposes clearing of standard derivatives, risk mitigation (confirmation, reconciliation, margin) for uncleared ones and reporting of all derivatives; EMIR 3 (2024/2987) added the active account requirement.