The UK Financial Conduct Authority (FCA) and the Bank of England (BoE) are set to implement significant updates to the reporting requirements for over-the-counter (OTC) derivatives under the UK EMIR REFIT framework, which will come into effect end of September 2024. These changes aim to align the UK’s derivatives reporting regime with international standards and enhance the overall transparency, accuracy, and regulatory oversight in the derivatives market.
With the compliance deadline set for the 30th of September 2024, market participants must promptly adapt their reporting practices to conform to the revised requirements.
The UK EMIR REFIT introduces a wide array of alterations designed to improve data quality and streamline regulatory processes.
Some of the key differences introduced by the UK EMIR REFIT are:
- ISO 20022 XML Data Format: The UK EMIR REFIT mandates the adoption of the ISO 20022 messaging standard for reporting. This standardized format facilitates better data exchange and interoperability between market participants and regulatory authorities, ensuring more consistent and reliable reporting.
- Unique Trade Identifier (UTI) and Unique Product Identifier (UPI): The UK EMIR REFIT introduces more detailed transaction and instrument information, enhancing traceability and risk assessment. These changes align the UK’s reporting framework with global standards, similar to those adopted in the EU, USA, ASIC and other jurisdictions.
- Event Type and Action Type: The combination of event types and action types results in numerous distinct and permissible value combinations, significantly altering lifecycle event management. This requires specific actions within the reporting system of each entity, ensuring more precise and comprehensive event reporting.
- New and Expanded Reporting Details: Market participants must include additional or expanded details in their reports. The number of fields increases from 129 to 204. This includes fields related to notional schedules, spreads and options, other payment types, and package fields. These enhancements aim to provide regulators with deeper insights into market activities and improve data quality.
- Re-reporting: Under the UK EMIR REFIT, re-reporting must occur within six months of the go-live date. Reporting Entities must update all affected fields (except UTI) for outstanding trades to meet the new standards.
- New EoD and Intraday Reports: Counterparties will receive streamlined trade and margin-related intraday and end-of-day reports. These reports provide enhanced transparency and clarity into their reporting activities, facilitating better risk management, compliance oversight, and informed decision-making.
- Reporting Significant Issues to Regulatory Authorities: This new requirement mandates the disclosure of any significant issues encountered during the reporting process. These issues could include obstacles that prevent reporting, misreporting due to system flaws, or issues resulting in reporting errors that would not cause rejections by a TR. The objective is to enhance regulatory oversight and ensure timely intervention to mitigate potential risks.
In conclusion, the UK EMIR REFIT marks a substantial overhaul of derivatives reporting in the UK, introducing comprehensive reforms aimed at bolstering transparency, data quality, and regulatory oversight. Market participants must swiftly adapt to these changes to ensure seamless compliance with the revised regulatory landscape.
By staying ahead of these regulatory updates, firms can not only meet compliance requirements but also leverage improved data quality for better risk management and strategic decision-making.
How MAP FinTech may assist
To navigate this complex landscape seamlessly, trust MAP FinTech’s expertise, cutting-edge technology and customised solutions. Our team provides expert guidance to ensure your understanding of the implications of UK EMIR REFIT, while our advanced reporting solutions ensure accuracy and efficiency. With personalized support and ongoing assistance, we can assist you to swiftly adapt and confidently embrace compliance in this evolving regulatory environment. Furthermore, we now have the benefit of extensive experience from the EU EMIR REFIT, which can significantly aid in the implementation of the UK EMIR REFIT. This prior experience has equipped us with a deep understanding of potential challenges and best practices, enabling us to anticipate issues and provide proactive solutions. By leveraging our insights from the EU framework, we can ensure a smoother and more informed transition, minimising disruptions and enhancing your compliance processes.