EMIR UK - Changes to the Reporting Obligation in September 2024

The upcoming 2024 EMIR Refit marks a critical shift in the reporting requirements between EU EMIR and UK EMIR. While the two frameworks will remain broadly aligned, they are diverging in terms of implementation dates and specific regulatory obligations. This split, part of the broader post-Brexit regulatory shift, calls for firms operating in both jurisdictions to adapt their compliance strategies accordingly.

The EU EMIR changes were implemented on 29 April 2024 (refer to my earlier article on EU EMIR here for more details). Meanwhile, UK firms are bracing for the changes to the UK Reporting Obligation, set to take effect on 30 September 2024.

Key Changes Introduced by the EMIR Refit

The EMIR Refit introduces not only updates to existing frameworks but also significant procedural changes. Among the most notable updates are:

• Expansion of reportable fields from 129 to 203.
• Enhanced data quality standards, as outlined by the UK’s Financial Conduct Authority (FCA), with new FCA Data Quality Standards introduced alongside amendments to the current EU Regulatory Technical Standards.

These changes will demand greater clarity in reporting, with firms needing to actively engage their monitoring and reconciliation systems. The aim is to ensure that required information is accurately provided to trade repositories and counterparties, with firms expected to closely monitor and correct any errors or omissions in the new reportable fields.

Key Amendments to the UK EMIR Reporting Obligation

Several crucial areas of the reporting obligation are being revised, including:

1. Trade Reporting Clarity: Trade reports will now contain 204 optional fields, of which 149 are reconcilable.
2. Trade Reporting Format: Reports must be submitted in the ISO20022 XML format, as mandated by the FCA.
3. Trade Reporting Errors: Firms must notify the FCA if they encounter any material errors or omissions in their reports.
4. Unique Product Identifiers (UPIs): A new mandatory product-level identifier for derivatives will replace the current use of ISINs.

Transition and Implementation Timeline

While firms have been granted a transition period to update existing OTC contracts, there will be no transition period for the trade reporting of new contracts. Firms must update their systems now to ensure that, from 30 September 2024, all new trades comply with the new UK EMIR standards.

Impact of Expanded Reporting Fields

The increase in reportable fields from 129 to 204 presents new regulatory challenges. This includes the mandatory reporting of additional product details, such as underlying crypto assets, and increased precision in reporting swap directionality. The jump from 53 to 149 reconcilable fields is expected to initially raise the number of reconciliation breaks, putting pressure on compliance and operations teams.

Preparing for the 2024 UK EMIR Refit

Internal Reporting Teams

Firms conducting internal trade reporting must ensure that their reporting and operations teams are well-prepared. This includes:

• Training on the expanded reporting fields and the new data flows between front and middle offices.
• Implementing processes to obtain and maintain Unique Product Identifiers (UPIs), which are integral to the new reporting format.

Outsourcing Reporting

For firms outsourcing their trade reporting, the responsibility for timely and accurate reporting remains with the firm. To ensure compliance, firms should:

• Confirm that their outsourcing providers have the necessary data to meet the new reporting standards.
• Engage with service providers to ensure operational and system interoperability before the 30 September 2024 deadline.

Monitoring Systems and FCA Notifications

In light of the new FCA requirements, firms must update their breach monitoring systems to manage the obligation to notify the FCA of material errors or omissions in trade reporting. Unlike the EU’s threshold-based rules, the FCA will take a more qualitative approach, requiring firms to assess the materiality of errors based on their business’:

• Size
• Nature
• Complexity

Additionally, the refit mandates that counterparties provide UPIs and adjust the UTI generation logic, requiring firms to reconfigure their data management systems to ensure accuracy.

Conclusion: A Regulatory Opportunity

The 2024 UK EMIR Refit is not just a regulatory challenge; it is an opportunity to improve the integrity and efficiency of financial reporting in the derivatives market. Firms that are not currently responsible for reporting should also prepare for the expanded data collection demands, which may necessitate significant operational changes. Proactively addressing these requirements will position firms for smoother compliance and better reporting accuracy in the future.

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