EMIR Refit Go-Live Pressure
Firms are currently under immense regulatory pressure to correct historical trades before the EMIR Refit comes into effect in 2024. This pressure arises from the need to ensure that all trade data aligns with the new reporting standards and data formats introduced by EMIR Refit. Failure to do so could result in non-compliance and potential penalties. Therefore, firms must invest significant effort and resources to meet this deadline.
Increased Effort Post-EMIR Refit Go-Live
EMIR Refit introduces brand new data formats, with ISO 20022 standard XML schemas becoming the norm for data exchange between reporting firms, Trade Repositories (TRs), and regulators. Moreover, inter-TR reconciliation will also rely on the same ISO 20022 standard XML data standards. This shift in data formats means that if corrections are required post the EMIR Refit go-live date, it will necessitate even greater effort and resources for historical trades.
EMIR Refit New Fields Required
One of the major challenges that firms face in the wake of EMIR Refit is the addition of 97 new fields that will be required for reporting. These fields were not part of the reporting requirements before EMIR Refit. One significant change is the alteration of the Unique Trade Identifier (UTI) generation waterfall model, which will impact existing UTI generation agreements and processes among counterparties. New counterparty fields will be required in case firms need to back-report historical trades.
Additionally, derivatives trades that are not identified by ISIN will require UPI reporting. The UPI must be sourced from ANNA-DSB using underlying instrument reference data parameters. This adds complexity to trade reporting and data sourcing.
Furthermore, regulators have introduced a new "Event Type" field to align trade reporting with real-world trade life cycle events, in addition to the existing "Action Type" field. Firms will need to accurately report these event types, adding another layer of complexity to their reporting processes.
Finally, there is a very specific way in which back reporting of historical trades needs to be done and trades need to be distinguished if they are open or closed.
Navigating the Challenges
To effectively address historical corrections and meet the new reporting requirements under EMIR Refit, firms need to undertake several key steps:
1. Assessment and Gap Analysis: Firms should conduct a thorough assessment of their current reporting processes and data to identify gaps and areas requiring correction or enhancement to align with EMIR Refit standards.
2. Data Standardisation: Implementing ISO 20022 standards for data exchange and reconciliation is crucial. Firms should invest in systems and technologies that support these standards.
3. Data Sourcing: Establish processes to source UPI from ANNA-DSB and ensure the accuracy of underlying instrument reference data parameters.
4. Documentation, Audit and Compliance: Update internal documentation, reporting workflows, and compliance procedures to include the new fields and reporting requirements.
5. Testing and Validation: Rigorous testing and validation processes should be put in place to ensure that historical corrections are accurate and complete, reducing the risk of reporting errors.
6. Training: Train staff on the new reporting requirements and data formats to ensure a smooth transition and ongoing compliance.
Conclusion
EMIR Refit's impending go-live date in 2024 is placing significant pressure on financial firms to correct historical trades and adapt to new reporting standards. With the introduction of ISO 20022 standards, new fields, and changes to UTI generation, firms must invest time and resources to ensure compliance. Navigating these challenges requires a proactive approach that includes assessment, data standardization, sourcing, documentation, testing, and training. By taking these steps, firms can navigate the historical corrections post-EMIR Refit successfully and remain compliant in the evolving regulatory landscape.
This blog was co-authored by Karan Kapoor, Head of Risk & Regulatory Consulting at Delta Capita and Kalyan Deshpande, Founder of Reg-X Innovations. Reg-X RegAssure Back Reporting is the only automated back-reporting solution for EMiR, MiFID, and SFTR in the world. Delta Capita has partnered with Reg-X to accelerate back reporting and optimise costs, revolutionising how compliance is achieved in the financial landscape.
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