EMIR Refit 2024: Key Changes and Challenges for UK Startups

A Comprehensive Guide to the EMIR Refit 2024 and Its Impact on Derivatives Reporting for UK Startups

3 mins read

The European Market Infrastructure Regulation (EMIR) Refit 2024 brings significant changes to derivatives reporting for European Economic Area (EEA) and UK-based companies. As the go-live date of April 29, 2024, approaches, it is crucial for UK startups to understand the key changes and challenges associated with EMIR Refit. This guide provides an in-depth analysis of the five key changes and their implications for startups operating in the UK. From expanded reportable fields to the adoption of XML submissions, this guide covers everything startups need to know to comply with the new EMIR regulations and optimize their derivatives reporting processes.

Key Takeaways:

  • EMIR Refit 2024 introduces five key changes that will impact derivatives reporting for UK startups.
  • Startups will need to adapt to an increased number of reportable fields, from 129 to 203, requiring more detailed information on counterparties and trade obligations.
  • Reporting via XML using ISO 20022 standards will replace the previous CSV format, offering a more standardized and level playing field for trade repository reporting.
  • The formalization of Inter-TR reconciliation process improves data integrity and includes minimum time requirements for reconciliation.
  • The introduction of Unique Product Identifiers (UPIs) aims to reduce inconsistency and enhance data quality, but firms will need to allocate time and resources for UPI application and adhere to reporting deadlines.
  • Changes to the Unique Trade Identifier (UTI) generation waterfall require bilateral agreements between firms and adhere to Critical Data Elements (CDE) guidance.

Key Changes in EMIR Refit 2024:

  1. Expanded Reportable Fields:

EMIR Refit 2024 brings a substantial increase in the number of reportable fields. The addition of 89 new fields, the withdrawal of 15 fields, and updates to field names, definitions, and formats pose challenges for startups. Some fields, such as asset class specific fields, are logical additions, while others, like “Clearing Threshold of Counterparty 2” and “Corporate Sector of Counterparty 2,” require more detailed information about counterparties.

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Table 1: Comparison of Reportable Fields Before and After EMIR Refit 2024

Before EMIR Refit 2024After EMIR Refit 2024
Number of Reportable Fields129203
Changes in FieldsWithdrawal: 15 fieldsAddition: 89 fields
Source: Costandia Josif, Kaizen Reporting
  1. Adoption of XML Submissions:

EMIR reporting will shift from CSV to XML submissions using ISO 20022 standards. While XML submissions offer a more standardized format and facilitate portability between trade repositories, the transition poses a significant challenge. Startups will need to adjust their reporting processes, potentially requiring additional training and expertise in XML submission.

  1. Formalization of Inter-TR Reconciliation Process:

The EMIR Refit 2024 brings a formalized Inter-TR reconciliation process, addressing the long-standing need for consistent reconciliation guidelines. The process now includes minimum time requirements and mandates trade repositories to send mismatched fields with corresponding data to firms each day. These improvements aim to enhance data integrity and reduce discrepancies between submissions.

  1. Introduction of Unique Product Identifiers (UPIs):

The lack of a standardized unique reference type for identifying product types has been a long-standing issue in derivatives reporting. The introduction of UPIs under the Association of National Numbering Agencies Derivatives Service Bureau (ANNA DSB) provides a centralized solution. UPIs offer the potential to reduce inconsistency and streamline reporting by consolidating various data fields. However, firms will need to allocate resources for UPI application and comply with reporting deadlines.

Table 2: Benefits and Considerations of Unique Product Identifiers (UPIs)

BenefitsConsiderations
Reduction of inconsistency in reportingApplication and allocation process for UPIs
Streamlining of reporting through consolidated data fieldsCompliance with reporting deadlines
Source: Understanding the Key Changes in EMIR Refit
  1. Changes to Unique Trade Identifiers (UTIs):
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The EMIR Refit 2024 revises the UTI generation waterfall, impacting how reporting counterparties establish UTIs. Previously, firms would bilaterally agree on the UTI generation process, but the revised proposals prioritize Critical Data Elements (CDE) guidance. This change aims to harmonize global reporting, but some market participants argue for the flexibility of bilateral agreements. Nonetheless, the revised UTI format and reporting requirements emphasize timely reporting and data accuracy.

Implications for UK Startups

The EMIR Refit 2024 brings both challenges and opportunities for UK startups engaging in derivatives reporting. Startups will need to allocate resources to understand and implement the changes outlined above. Adapting to the expanded reportable fields, transitioning to XML submissions, and complying with UPI and UTI requirements will require careful planning and collaboration.

Furthermore, it is essential for startups to stay updated with regulatory guidance and industry best practices to ensure compliance with the EMIR Refit 2024 regulations. Leveraging technology solutions and partnering with experienced regulatory reporting providers can streamline the process and reduce the burden on internal resources.

Conclusion

The EMIR Refit 2024 introduces significant changes to derivatives reporting for UK startups. Understanding and implementing these changes will be critical for startups to comply with the new regulations and optimize their reporting processes. Adapting to expanded reportable fields, transitioning to XML submissions, and adhering to UPI and UTI requirements will require careful planning, resource allocation, and collaboration with industry experts. By embracing these changes and staying updated with regulatory developments, UK startups can navigate the complexities of EMIR Refit 2024 and ensure a smooth transition to the new reporting regime.

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References


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