Now that the new reporting obligations EMIR (European Markets Infrastructure Regulation Refit have come into force as of 29th April 2024, we take a look at what happens now and what are the next steps across the UK and Europe for over-the-counter (OTC) derivative transactions.
If you are already under the EMIR reporting regime or are in the process of broadening your trading scope to include derivative products, EMIR Refit applies to you. If you are an active EMIR reporter, you are now obliged to comply with the new reporting requirements for all new OTC derivative contracts from 29th April onwards and you will have already transitioned or be in the process of transitioning non matured derivative contracts predating the go live date.
The transition period, based on ESMA timelines, for total load transition of all existing OTC derivative contracts to the new technical standards is six months after initial go live. It is expected that organisations will have incorporated the transition of affected transactions into their EMIR Refit readiness planning as advised by their regulators. However, that approach is likely to differ from organisation-to-organisation dependant on impact. One benefit of transitioning post go live is that organisations will have put in place the required changes to systems and appropriate processes changes, which will of course have been fully tested, in their preparation for 29th April. The mapping of the existing transactions to the new report format and field data required should provide a clear pathway forward but data harmonisation and applying the additional reference data may prove problematic.
UK EMIR
It is also important to note that UK legislators have performed their own review of EMIR, commonly referred to as UK EMIR, which was on shored into UK legislation post-Brexit. With a confirmed go live date of 30th September 2024, the five-month gap is cause for concern for organisations that are required to report under both regimes. Reporting entities will effectively have to report both old UK EMIR and new EU EMIR Refit formats simultaneously. Supporting two reporting models systematically and process wise is a considerable challenge and fraught with potential risks.
Behind the Curve?
For organisations that have either not started or find themselves behind the curve in their preparations the reality is stark; you cannot enter into new derivative contracts where the obligation to report said transactions is your responsibility. For organisations that have been actively trading for their customer base this has both financial and reputational implications, missed revenue opportunities and the potential loss of customers to competitors who are EMIR Refit compliant. As we have mentioned in our previous blog ESMA fines and sanctions for non-compliance can be significant and seriously impact an entity’s reputation and financial standing. There could be numerous contributing factors as to why organisations may find themselves in this situation however there are solutions to every problem. Technology exists that provides the route to compliance for EMIR Refit and beyond which futureproofs systems and controls requirements and offers genuine revenue generating toolkits,
Final Thoughts
As the scale of changes for EMIR Refit have now been realised and the transition of existing transactions begins for some reporting entities, there will no doubt be retrospectives performed with varying degrees of results. Working closely with your solutions providers to navigate these times remains crucial to ensure the future proofing of reporting as we progress through the full refit challenges. We offer a comprehensive regulatory reporting suite for MiFIR within our own product and EMIR as part of the Siena platform, check out our website here and book in for a 30 minute consultation.
