* European Commission takes hard line on sector
* Regulator approves first four trade repositories
* ESMA says processing further applications
* Mandatory reporting to start February 12
By Huw Jones
LONDON, Nov 7 Users of all financial derivatives in the European Union will have to report their trades from February after the bloc's executive vetoed a request from regulators for a delay.
A delay would hinder the ability of regulators to spot potentially destabilising risks building up in markets, the EU's executive European Commission said.
New rules to make the world's $700 trillion market for credit default swaps and interest rate swaps safer are being rolled out in the EU and elsewhere across the world.
One element is the mandatory recording of trades to give regulators a clear, instant picture of who holds what, something they lacked when Lehman Brothers bank went bust in 2008, creating uncertainty that roiled markets.
The European Securities and Markets Authority (ESMA) had asked the bloc's executive body for a one-year delay to 2015 for mandatory recording of derivatives traded on an exchange but has been rejected.
"I would like to inform you of the European Commission's intention to reject the draft implementing technical standard submitted by ESMA," Jonathan Faull, a senior commission official wrote to ESMA in a letter dated Nov. 7 seen by Reuters.
ESMA, which had no comment on the letter, wanted to give itself more time to develop proper guidance to ensure consistent implementation across the bloc. That guidance will now be fast tracked to meet the February start date.
Faull said he does not consider these concerns to justify the proposed delay as it would "prejudice" the ability of regulators to get a snapshot of the derivatives market to spot the build up of destabilising risks.
The rejection means that transactions executed on as well as off exchanges must be reported from early next year.
Separately on Thursday, ESMA approved the first batch of trade repositories and set a February 12, 2014 for mandatory reporting by banks, companies and other users of derivatives.
Two are based in London: DTCC, part of the U.S. Depository Trust & Clearing Corp, and UnaVista, owned by the London Stock Exchange.
Two others were also approved: KDPW in Poland and owned by the Warsaw Stock Exchange, and Regis-TR in Luxembourg, owned by Deutsche Boerse and the Spanish Stock Exchange.
Crispian Lord, a regulation partner at consultant PwC said firms have little time to get to grips with reporting requirements and there are significant risks to getting it wrong, including fines for misreporting.
So many trade repositories are being opened across the world in the hope of turning a mandatory rule into a moneyspinner that regulators are now having to look at how all the data could be aggregated seamlessly.