The implications of the EMIR Refit
Due to the changing landscape since the initial inception in 2012, the original EMIR (European Market Infrastructure Regulation) legislation has become outdated.
The EMIR Refit was originally introduced with the goal of simplifying regulations, and these new requirements took effect in 2019. Following the EMIR Refit, there has been a subsequent round of amendments and updated technical guidelines. In this article, we highlight the key changes.
ESMA has published the final reporting guidelines for the updated EMIR refit to take effect on 29 April 2024 (Europe) and 30 September 2024 (UK). These changes, while strivinging to streamline and standardise the reporting across Trade repositories, will add some initial challenges in setting up the new report and reporting format.
Although a significant number of corporates rely on the financial counterparty to report on their behalf, these changes can still cause a major headache for corporates that continue reporting by themselves or need to report internal trades.
The first major change concerns the number of fields that can be reported on. Currently there are 129 reportable fields, under the updated legislation there is a withdrawal of 15 and 89 new fields. This brings the new report to a hefty 203 reportable fields.
There will be an introduction of more counterparty-specific fields. These fields will require a deeper understanding of and communication with all counterparties. New counterparty data that will be required includes a Clearing Threshold and Corporate Sector.
The way that these fields will be reported is under huge review. The updated legislation will remove the CSV file, a business staple due to its ease of creation and flexibility, and replace the file with an XML submission using ISO 20022 standards. This move to XML will give corporates the headache of building the necessary XML file. One benefit of the XML format is that it will make moving between Trade Repositories easier as there will be a uniform file specification.
Another major change concerns the introduction of a Unique Product Identifier (UPI). The UPI is aimed at reducing the misreporting of products, ISINs, CFI codes, and other classifications. The UPI will be controlled and issued by the Derivatives Service Bureau (DSB). With a central database of identifiers, this should reduce misreporting. It is also hoped that the use of a centrally managed UPI will lead to a reduction in the number of reportable fields in the future . A downside to this change is that companies will need to sign up with the DSB and a fee will be charged for each UPI. There is a general consensus that with the introduction of the UPI, the UTI is likely to be phased out and removed in the future.
One easily missed detail on the new requirements is the necessity to update all outstanding trades to the new reporting format and level of detail, within 6 months of the go-live. This can be problematic for firms that don’t have the necessary data points for the historic trades and will require a review to bring these trades up to the required reporting standard.
In summary, there are large changes in the number of fields needing to be reported, much more granularity required from dealing counterparties, and a change of file type to XML.
Reporting validations and final report can be found on the ESMA website.
With our experience in EMIR and EMIR Refit legislation we can help with the transition to the new reporting requirements.