This article was written by Alexis Wiazmitinoff, Product Manager for EMEA Regulatory Reporting at Bloomberg.
European Markets Infrastructure Regulation (EMIR Refit) reporting
Derivatives trading firms active in the EU and UK markets are about to face an important overhaul of transaction reporting requirements, with the new technical standards (RTS) of the amended European Markets Infrastructure Regulation, or EMIR Refit.
The days when “getting the data out” ticked the regulatory reporting box will soon be over and firms will need to “get it right” or potentially face supervisory actions.
While this will require firms to adapt their reporting solutions and processes ahead of the relevant go-lives (see more details here), the new requirements will also bring much needed improvements. They will notably help further decrease the likelihood of firms failing at reporting altogether and facilitate the collaboration between counterparties on pairing and matching through a new mandated trade repository agnostic format for reporting.
The EMIR Refit should also prompt firms to go beyond the purely tactical approach of meeting trade repository validations and consider how the regulation is harnessing the global harmonization efforts led by the G20 to upgrade transaction reporting.
By approaching the new requirements strategically now, firms will be able to prepare for go-live with confidence. In this update we outline what challenges firms need to overcome and how, in order to meet the key requirements of:
- ensuring completeness of delegated reporting,
- avoiding over and under-reporting,
- and reporting accurately beyond trade repository validations.
Completeness of delegated reporting
Reporting on behalf of other firms in addition to reporting own derivative transactions can be a complex process to manage. Sell-side firms cannot possibly possess all the information that needs to be reported on behalf of the buy side. Special attention is required notably for fields that may change from trade to trade such as Broker ID, or whether the trade is for hedging or a genuine market activity. Running completeness and accuracy checks on such transactions is paramount to avoid supervisory action down the line.
The new RTS also requires both sides to implement operational procedures covering exchange of information and obligations in case of delegation.
To make things easier for our clients, Bloomberg’s Assurance solution helps sell-side firms check valid transactions at the Trade Repository against transactions in the source systems of the buy-side firms they report on behalf of. As a result, sell-side firms have oversight on the completeness checks of delegated flows. The solution also helps both sell and buy-side firms reporting on their own behalf detect over or under reporting on transactions they are responsible and legally liable for.
Avoid under and over-reporting
A derivative contract’s eligibility for reporting will not change under EMIR Refit, which focuses on the obligation to reconcile at source to avoid under and over-reporting, and to monitor reporting accuracy.
At the date of publication of this article, EMIR refit go-live dates for EEA only countries (Norway, Iceland and Liechtenstein) have not been confirmed. However, firms with a reporting obligation in the EU27 and in the UK will have to ensure completeness of reporting to their relevant Trade Repository from April 29, 2024 and
Meeting the new data quality requirements to perform reconciliations will pose a major challenge for firms who do not have suitable systems and processes in place.
Bloomberg’s Assurance has been designed to reconcile transactions booked in source systems with transaction successfully reported at the Trade Repository of choice, enabling firms to detect both reportable derivatives transactions which have not been reported, and derivatives transactions which should not have been reported. It also runs field-level accuracy checks on part of or all fields loaded. This allows eligibility and accuracy issues to easily be prioritised for remediation.
Accuracy beyond Trade Repository validations
Under the EMIR Refit, firms will have new error and omission reporting obligations. While close to two thirds of the current reportable dataset will remain reportable under EMIR Refit, outstanding derivative contracts that are live as of April 29, 2024 will need to be upgraded to the new ISO 20022 standards by October 29, 2024 in Europe. Past that date, provided a certain volume threshold is reached, firms will need to notify their National Competent Authorities of invalid or “valid but wrong” reports as soon as they are aware. Receiving ack/nacks from trade repositories will not suffice.
Bloomberg’s Assurance solutions supports both pre- and post-reporting needs to firms.
The solution checks firms’ reports prior to submission to the trade repository of choice, and allows them to control the level of scrutiny applied to submissions. The validation rules are fully transparent and complement trade repository validations instead of simply replicating them, allowing firms to detect “valid but wrong” reports on EMIR fields in scope for EMIR Refit today.
Post reporting, the solution can detect and remediate “valid but wrong” reports in the trade state report from the chosen trade repository by running in-depth quality check.
With help from Bloomberg’s world-class reference data set, the know-how of our regulatory experts is embedded in the rules that underpin our Assurance solution, ensuring it goes beyond typical trade repository validations to provide firms with a fully-fledged quality assurance framework with ease of implementation.
To learn more about Bloomberg Regulatory Reporting Services, please contact us or visit our Regulatory Reporting Services website.
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