EMIR REFIT Reporting: The Clock is Ticking – Are You Ready?

• Time to go-live is short – Monday 29 April 2024 for EU EMIR, and Monday 30 September 2024 for UK EMIR.
• All in-scope derivatives users will be affected by the changes.
• The changes are significant and will take time to implement.
• Existing trades will be affected too.
• Firms should be thinking now about what they need to do to be ready for the forthcoming compliance dates.

2024 heralds significant changes to the EMIR derivatives reporting requirements under both the EU and UK regimes.¹

There is not much time left until go-live – Monday 29 April 2024 for EU EMIR, and Monday 30 September 2024 for UK EMIR.

Episode 5 of our Dechert on Reg series takes a deeper dive into the new requirements and the EMIR reporting requirement generally.

Why is this important?

All in-scope derivatives users will be affected by the changes.

Moreover, the changes are significant and will take time to implement. There remain unknowns.

Messaging from the regulators is clear – day 1 compliance is expected. To meet that deadline, firms should be thinking now about what they need to do to be ready for the forthcoming compliance dates.

At a glance – the key changes

• Reporting fields and reporting format
  • The number of reportable fields will increase from 129 to 203 in the EU and to 204² in the UK. Not all fields will apply to all products or contracts. The changes are not limited to adding new fields to existing fields, but rather new fields are added throughout the reports and, in several instances there are changes to the content, and removal, of existing fields.
  • Wholesale changes will be made to the reporting format and reports will need to be made based on ISO 20022 XML standards only. For regulators, this will improve standardisation, but for market participants, existing formats will need to be amended and upgraded. Functionality will also need to be tested to make sure that all parts of a firm’s reporting system and processes recognise the new format.
• Requirement to notify regulators of certain reporting issues
  • Under the new EU EMIR reporting regime, there is now a requirement for the Entity Responsible for Reporting (ERR)³ to promptly notify National Competent Authorities (NCAs) (both the ERR’s NCA and the NCA of the reporting counterparty, if different) of any one of the following as soon as it become aware:
    1. Any misreporting caused by flaws in the reporting system that would affect a significant number of reports;
    2. Any reporting obstacle preventing the Report Submitting Entity (RSE) from sending reports to a trade repository (TR) by the mandated deadline; and/or
    3. Any significant issue resulting in reporting errors that would not cause rejection by a TR.

The ESMA “Guidelines for reporting under EMIR”⁴ set out a quantitative test (in the case of (1)) and a qualitative test (in the case of (3)), to determine what is “significant”.

In contrast, under the new UK EMIR reporting regime, the FCA requires the ERR to notify it⁵ of any material errors or omissions in its reporting as soon as it becomes aware of them – but does not set out details of what must be notified and does not plan to provide detailed guidance on what constitutes “material” for this purpose.

• TR verification and reconciliation
  • Within 60 minutes of receiving a report, TRs must verify specific items in a report – including that the XML template complies with ISO 20022 methodology and that the RSE is authorised to submit the report on behalf of the counterparty or (if different) the ERR – and must reject a report, assigning a specific rejection category, if a report does not comply with specified requirements.
  • TRs must also reconcile both sides of the report to ensure that they match (when certain conditions are met) and must notify the RSE of the results of the reconciliation within 60 minutes of completing the reconciliation process. Each working day, the TR will report specific information to the reporting counterparty, the RSE and the ERR no later than certain prescribed times the following day.
  • The reporting counterparty, the RSE and ERR must have arrangements in place to ensure feedback on reconciliation failures is taken into account.

Existing transactions are in scope too….

• EU regime – derivatives outstanding on 29 April 2024 have a transition period of 180 days (i.e., until 26 October 2024) to be updated to conform with the new standards. A modification (including a life cycle event) or a correction after 29 April 2024 but before 26 October 2024 will prompt an earlier update to conform to the new standards.
• UK regime – derivatives outstanding on 30 September 2024 have a transition period of 180 days (i.e., until 31 March 2025) to be updated to conform with the new standards. A modification (including a life cycle event) or a correction after 30 September 2024 but before 31 March 2025 will prompt an earlier update to conform to the new standard.

What can you do now to prepare?

• Consider your existing EMIR reporting arrangements and engage with relevant entities/providers to discuss changes, testing and timing.
• If reporting is currently achieved through a voluntary delegation arrangement (e.g., through a derivatives counterparty or by a third-party services provider), contact the services provider to understand how they intend to address the changes for both new and legacy transactions and if changes to the delegated reporting services agreement are needed.⁶
• Improve internal data quality to capture the new data required under the EMIR reporting requirements.
• Consider new or revised policies and procedures to afford the necessary oversight to ensure compliance with the new requirements.
• In particular, ERRs must make certain that the necessary processes and policies are in place to ensure compliance with the NCA notification obligation including the ability to obtain and receive all the necessary information to determine if such a misreporting notification obligation arises.

Overlapping rules

The timing differences for the EU and UK mean that some firms will have to comply with three sets of rules and systems from 29 April 2024:

• new EU rules for new transactions and existing transactions that are modified/subject to another lifecycle event;
• current EU rules for existing transactions; and
• current UK rules.

A word of warning…

Regulatory reporting is on the radar of regulators and a key aim of the new reporting standards is to improve and enhance reported data quality.

On 28 November 2023, the Central Bank of Ireland reprimanded and imposed a €192,500 fine on an Irish investment fund for breach of its EMIR reporting requirements,⁷ the first for an EMIR breach.

1. The six implementing and delegated regulations setting out ITS and RTS supplementing EU EMIR in relation to reporting, data quality and data registration of trade repositories under EMIR REFIT are available here. Note Commission Implementing Regulation (EU) 2022/1860 has been amended and a consolidated version is available here. The ESMA EMIR Reporting landing page with all related resources can be found here.
   The UK Financial Conduct Authority’s (FCA) page on EMIR REFIT Reporting, including links to the amended Technical Standards, Validation Rules and XML schemas to support implementation validation rules are available here.
2. The UK has an additional, optional field, for execution agent.
3. See our 2019 and 2020 EMIR notes on the previous changes to the responsibility for the EMIR reporting requirement available here and here.
4. ESMA’s Guidelines are available here.
5. In the case of CCPs, the relevant regulator is the Bank of England not the FCA.
6. ISDA, in collaboration with AFME, FIA, ICMA and ISLA has recently published an updated version of the Master Regulatory Reporting Agreement and explanatory memorandum. The updated MRRA can be found here and the updated explanatory memorandum setting out the architecture and the background to the MRRA is available here.
7. The CBI's public statement relating to the enforcement action is available here.