2.1 Trade Reporting Requirements for Over-the-Counter (OTC) Derivatives Contracts
2.1.1 Application
6. The reporting requirements are applicable to all banks in the Kingdom of Saudi Arabia (KSA) with OTC derivative transactions.
2.1.2 Scope of Reporting
7. OTC derivative transactions that fall within the scope of “reportable transactions” described in paragraph 8 to 12 below are required to be reported to the SAMA authorised Trade Repository Operator.
8. Reportable transactions are derivative transactions that meet the following criteria:
a. The transaction is traded over the counter cleared or non-cleared (i.e. exchange traded transactions are excluded) or is novated from an OTC transaction to a central counterparty (CCP);
b. The transactions are an interest rate derivative, a foreign exchange (FX) derivative, an equity derivative, a credit derivative and a commodity derivative supported by the SAMA authorised Trade Repository;
c. The transaction is conducted by a counterparty which is a licensed bank in Kingdom of Saudi Arabia (KSA) (in the case of a locally incorporated bank) or a KSA branch (in the case of a foreign bank) or by its financial subsidiaries or branches (including SPVs).
d. The other counterparty to the transaction is:
i. A licensed bank in KSA (in the case of a locally incorporated bank) or a KSA branch (in the case of a foreign bank);
ii. A foreign financial counterparty;
iii. A KSA or a foreign non-financial counterparty; or
iv. A CCP if the transaction is novated from an OTC transaction to a CCP.
9. If a reportable transaction is, for example, entered into between a KSA branch bank X and the USA Head Office of bank Y, Bank X falls within paragraph 8(c) while Bank Y falls within paragraph 8(d). The transaction is reportable by Bank X but not by Bank Y. If however the transaction is booked in KSA branch of bank Y, reporting obligation rules must be applied to determine the reporting counterparty as per the single sided reporting obligation approach as mentioned in APPENDIX C.
10. The transactions referred to in paragraph 8(c) above include those that are booked in KSA office/branch of a licensed bank as a result of transfer of booking (i.e. through novation) of contracts entered into with external parties by the head office or overseas branches of the bank. If such novated transactions are reportable (i.e. the criteria set out in paragraph 8 above are also met after novation), the reporting bank should report the external counterparty (another licensed bank) who has originally entered into contract with the bank, instead of the office/branch from which the contract is transferred, as its counterparty to the transaction.
11. Reportable transactions do not include interbranch transactions (except those that fall within paragraph 9 above) and interbranch transactions (e.g. transactions between different desks of the treasury function). An interbranch transaction refers to a principal-to-principal transaction (or a back-to-back transaction) conducted between different branches of the same bank, including any transaction undertaken to transfer the risk of the transaction (or portfolio transactions) from one branch to another.
12. For the avoidance of doubt, reportable transactions:
A. Exclude “spot” FX transactions, which refer in this context to FX transactions that are settled via an actual delivery of the relevant currencies within two business days;
B. Exclude, from the perspective of a reporting bank, those transactions booked in its local or overseas subsidiaries (unless those subsidiaries are licensed banks and reporting criteria set out in these requirements are met, where in such case, they need to report to KSA TR regardless of their location);
C. Include, in the case of reportable transactions which are novated for central clearing, those new transactions entered into by reporting banks with CCPs ; and
D. Exclude, transactions in which any of the following institutions participate as counterparty:
i. The Government of the Kingdom of Saudi Arabia (those risk weighted at zero under the capital adequacy rules).
ii. SAMA
iii. The Saudi Stock Exchange
iv. The Saudi Depository Center
v. A Supranational Authority
vi. Multilateral Development Banks
2.1.3 Manner of Reporting
13. All reporting banks are required to directly report to the SAMA authorised TR Operator. Banks are not allowed to report through agents or outsource their reporting requirements to third party service providers.
14. All reporting banks are required to enter into a reporting service agreement with SAMA authorised TR Operator.
15. The reporting service agreement signed by each reporting bank with SAMA authorised TR Operator must contain a clause providing consent for the bank for the reporting of trade data to the SAMA authorised TR Operator by its counterparties. This consent is essential to alleviate any potential concern on data confidentiality from bank counterparties, which may need to report trade data to the SAMA authorised TR Operator relating to other counterparties that do not themselves have any such reporting obligation under the reporting requirements.
16. Since reporting has to be made to the SAMA authorised TR Operator by electronic means, reporting banks are required to set up systems linkages and conduct user tests with the SAMA authorised TR Operator. Reporting banks must complete the user tests to the satisfaction of the SAMA authorised TR Operator before they will be accepted for reporting.
17. The SAMA authorised TR Operator has designed specific templates for reporting the details of the reportable transactions. A reporting bank is required to complete all the fields in the templates, which primarily relate to the economic terms of a transaction and information essential for administrative purposes. A list of fields on the templates for reporting transactional data is attached as APPENDIX A.
18. Reporting to the SAMA authorised TR Operator is compulsory:
A. When a reportable transaction is executed by a reporting bank for the first time; and
B. Whenever there are subsequent reportable business events until the transaction is fully terminated (which includes termination due to novation). A list of reportable events is set out in APPENDIX B for reference.
19. A reporting bank may report changes in the economic details of a reportable transaction by submitting amendments to update the transaction records of the SAMA authorised TR Operator. Alternatively, the bank may update the records of the SAMA authorised TR Operator by submitting specific templates designated for reporting individual business events (APPENDIX B).
20. Reportable business events shall be reported by adopting a life cycle approach. Under the life cycle approach, each business event will be reported according to the T+1 reporting timeline referred to in paragraph 22 below.
21. After an original trade is novated for central clearing, the reporting bank should report the open trade as an early termination business events and open a new one with the reference to the old trade identifier in the field “Linked UTI” (table 3 item 47) as specified in the APPENDIX B
2.1.4 Timing of Reporting
22. The reporting bank will have to ensure that it reports to the SAMA authorised TR Operator reportable transactions (including where appropriate any subsequent business events) before 23:59:59 of the next business day (T+1). For the purpose of these reporting requirements, Fridays and Saturdays and general KSA holidays do not count as business days.
23. Reporting is not required if a reportable transaction that has yet to be reported to the SAMA authorized TR is cancelled or fully terminated within the T+1 reporting timeline. This, however, does not apply to the cancellation or full termination of a transaction for the sake of subjecting the transaction to central clearing. In such cases, the original reportable transaction pending central clearing (and the business events arising from the central clearing) should be reported according to the T+1 timeline, unless the transaction is cancelled or fully terminated before it is reported to the SAMA authorized TR Operator with T+1 timeline.
2.1.5 Reporting Error Amendments
24. Guidance on reporting error amendment can be found in APPENDIX B.
2.1.6 Keeping of Records
25. A reporting bank must keep records that enable the reporting bank to demonstrate it has complied with these requirements.
26. A reporting bank must keep the records for a period of at least ten (10) years from the date the record is made or amended.
2.1.7 Technical Support
27. The SAMA authorised TR Operator will provide the reporting banks with technical reporting guidelines/manual for its systems/reporting tools. All enquiries relating to technical support should be directed to the SAMA authorised TR Operator.