The UK FCA and the BoE are gearing up to roll out significant updates to the over-the-counter (OTC) derivatives reporting standards under the UK EMIR REFIT programme, effective from the end of September 2024.
According to MAP FinTech, these changes are designed to bring the UK’s derivatives reporting in line with global standards and enhance transparency, accuracy, and oversight within the derivatives market.
As the compliance deadline of 30th September 2024 draws near, market participants are urged to swiftly adjust their reporting procedures to align with the new regulatory demands.
The UK EMIR REFIT will see a host of modifications intended to elevate data quality and simplify regulatory workflows. Noteworthy among these are the implementation of the ISO 20022 XML data format for reporting, which supports improved data exchange and interoperability among stakeholders, ensuring more consistent and accurate reports.
The framework also introduces a Unique Trade Identifier (UTI) and Unique Product Identifier (UPI), facilitating enhanced transaction and instrument tracking and risk analysis. These additions bring the UK’s reporting standards closer to those observed in the EU, USA, and other regulatory jurisdictions.
A significant transformation under the UK EMIR REFIT involves the integration of event types and action types, creating numerous permissible combinations that revolutionise lifecycle event management. Entities must adapt their reporting systems to capture these details accurately, ensuring thorough and precise event reporting.
Moreover, the revision stipulates that reports must now contain additional or expanded details, increasing the number of fields from 129 to 204. This expansion includes fields related to notional schedules, spreads, options, other payment types, and package fields, all aimed at giving regulators a deeper insight into market activities and improving data quality.
Another key aspect of the UK EMIR REFIT is the requirement for re-reporting within six months following the go-live date. Reporting entities are tasked with updating all relevant fields (except UTI) for ongoing trades to conform to the new standards.
Furthermore, the new framework mandates the provision of streamlined trade and margin-related intraday and end-of-day reports to counterparties. These reports enhance transparency and clarity in reporting activities, supporting better risk management, compliance monitoring, and informed decision-making.
In addition, there’s now a requirement for reporting significant issues encountered during the reporting process directly to regulatory authorities. This could cover challenges that impede reporting, misreporting due to system faults, or errors in reports that wouldn’t necessarily trigger rejections by a Transaction Register (TR). This measure aims to improve regulatory oversight and facilitate timely interventions to address potential risks.
In summary, the UK EMIR REFIT signifies a comprehensive overhaul of the derivatives reporting landscape in the UK, introducing extensive reforms aimed at boosting transparency, data quality, and regulatory oversight. Market participants need to promptly embrace these changes to ensure seamless compliance and take advantage of the improved data quality for enhanced risk management and strategic planning.
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