UK EMIR Refit Go-Live (30th September 2024)

The upcoming UK EMIR Refit, effective from 30th September 2024, introduces significant changes to the derivatives reporting framework under the European Market Infrastructure Regulation (EMIR). This update aligns the UK’s reporting requirements with the global standards set by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). It is crucial for firms involved in derivatives trading to prepare for these changes to ensure compliance.

Key Changes to Consider

1. Data Reporting:

? ?- Expanded data fields: The number of reportable fields has increased, with enhanced granularity on transaction details.

? ?- UTI (Unique Trade Identifier) harmonization: Standardized UTI generation and sharing among counterparties is mandatory.

? ?- LEI (Legal Entity Identifier) requirements: Expanded use of LEIs across all counterparties, including smaller entities, for improved transparency.

2. Reporting Timelines:

? ?- T+1 reporting deadline: Derivatives transactions must be reported by the end of the following business day (T+1), accelerating previous timelines.

3. Counterparty Obligations:

? ?- Clearer delineation of reporting responsibilities between counterparties.

? ?- New requirements for financial counterparties (FCs) and non-financial counterparties (NFCs).

4. Data Quality and Reconciliation:

? ?- Enhanced reconciliation rules: More stringent checks between counterparties' reports to ensure data accuracy.

? ?- Data validations: Increased focus on data quality with mandatory validations at the trade repository level.

Exemptions and Extensions

1. Intragroup Transactions: Intragroup derivatives transactions may be exempt from reporting if certain conditions are met, including appropriate notifications to the Financial Conduct Authority (FCA).

2. Equity Options & Swaps: Temporary exemption: Reporting for equity options and swaps may be extended under specific conditions, providing relief to firms needing more time to comply with the new reporting standards.

3. Backloading of Historical Data: Firms are granted an extended deadline for backloading historical trade data (transactions prior to 30th September 2024) to allow a smooth transition to the new reporting standards.

4. Small NFCs (Non-Financial Counterparties): Small NFCs may receive temporary reporting relief, particularly if their activities are limited to hedging purposes. However, it is essential to confirm eligibility with the FCA.

Things to Keep in Mind

1. Readiness Assessment: Conduct a thorough review of internal systems and processes to ensure that they are aligned with the new reporting requirements.

2. Data Management: Ensure that data sources are updated to meet the new granular reporting fields, and maintain robust data reconciliation mechanisms.

3. Counterparty Communication: Establish clear lines of communication with counterparties regarding UTI generation and data sharing responsibilities.

4. Technology and Vendor Readiness: Ensure that trade repositories and third-party service providers are prepared for the new requirements, including handling data validation and reporting deadlines.

5. Compliance Strategy: Develop a strategy for addressing any gaps in compliance, including training for staff and allocating resources to manage the increased reporting workload.

6. Monitor FCA Guidance: Regularly check for updates from the FCA regarding clarifications, additional guidance, or further extensions.

Disclaimer

The information provided in this discussion is for informational purposes only and does not constitute legal, financial, or professional advice. Please refer to the full regulatory texts and guidelines for detailed information and consult with a qualified professional for specific advice tailored to your situation.