EMIR/EMIR Refit

After the 2008 financial crisis, lack of transparency was identified by the regulator as a root cause for risk building up in the derivatives market. In March 2012, the European Parliament adopted the European Market Infrastructure Regulation (EMIR – Regulation (EU) No 648/2012) with the aim of (i) increasing transparency in over-the-counter (OTC) derivatives markets, (ii) mitigating credit risk, and (iii) reducing operational risk. It is based on three principles:

• the clearing of OTC derivatives through central counterparties (CCPs);
• the application of margin requirements for contracts not cleared by a CCP; and
• the reporting of all derivative transactions to trade repositories (TR).

Since February 2014, financial and non-financial counterparties (FC/NFC) as well as CCPs have had to ensure that every settlement, change and termination of a derivatives contract – regardless of whether it is OTC or exchanged-traded (ETD) – is reported to a TR by the end of the following business day.

In May 2015, the European Commission (EC) released a public consultation paper regarding EMIR (“EMIR II“). ESMA´s Final Report (2015/1645) was published on 13 November 2015 and submitted to the Commission for approval. On 21 January 2017, the European Union published the revised implementing technical standards (ITS) ((EU) No 1247/2012) and regulatory technical standards (RTS) ((EU) No 148/2013) for Art. 9 (reporting requirements) EMIR in the Official Journal of the European Union. These amendments came into force on 10 February 2017 and became applicable on 1 November 2017.

EMIR Refit

Following a further extensive evaluation by the EC, a set of revisions to EMIR were published in the Official Journal of the European Union on 28 May 2019 ((EU) No. 2019/834) and entered into force on 17 June 2019, the so-called EMIR Refit. Directly applicable are the potential waiver for intragroup transactions and the stop of the backloading obligation for trades concluded before February 2014 as well as amendments in the clearing obligation.

EU & UK EMIR Refit

While the EU EMIR Refit will come into force on April 29th, 2024, the UK’s FCA announced that the EMIR Refit version for the UK will go live on September 30th, 2024. The FCA also published its EMIR validation rules and XML Schemas. These draft rules and schemas are subject to review and comments by the community until March 24th, 2023, with the final version expected to be released shortly afterward.

Although the UK EMIR Refit version is very much like ESMA’s Refit version, there are several differences:

• The Go-Live Date: There is a 5-month period in which UK and EU firms with dual reporting obligations must report for two different EMIR versions simultaneously. Thus, systems need to be adjusted to report the new version and the old version at the same time.
• Fields and Validations: The new “Execution Agent” field is different in the UK and EU versions. This is relevant for firms which submit on behalf of 3rd parties. In addition, several validations, and some changes in the XML Schema Definitions (XSD) that compose the ISO 20022 XML submission format used for reporting have been modified by the FCA.
• In the future, we anticipate more differences between the UK and the EU specifications when it comes to transaction reporting. This increases the need for firms to adopt and embrace technology and vendors who can quickly adapt to the changes of requirements, to minimise operational risk.

Regnology provides a modular-based platform for transaction reporting and supports, with its TR2 module, the existing EMIR framework as well as the future amendments of EMIR Refit.

Learn how we can help you with an efficient, fast, and cost-effective transition to all regulatory changes.

Interested in knowing more?