EMIR Refit reporting going live on 29 April 2024: what does it mean for asset managers?

4th April 2024

Updated trade reporting rules under EU EMIR are going live on Monday 29 April 2024, and equivalent rules are going live in the UK on Monday 30 September under UK EMIR. But what does it mean in practice?

Background

Asset managers will be aware that since the implementation of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (the “EMIR Regulation”), counterparties established in the EU and the UK are required to report the details of any derivative contract entered into, and any modification or termination of the contract, to a registered or recognised trade repository (TR) on a T+1 basis. This obligation applies equally to over-the-counter (OTC) derivatives and exchange-traded derivatives (ETDs). This article will not go into the details of the EMIR Regulation itself but you should contact us in case you require a specific analysis.

The now well-established practice for many asset managers in scope for the reporting obligation is to delegate such reporting to a third-party agent – typically their trade counterparties, such as an investment bank or a broker-dealer (in some other, limited cases, to a third party not otherwise involved in the actual trade). In other words, the trade counterparty typically makes the reports on the fund’s behalf. Most of the time, such arrangement is documented under a delegated reporting agreement, separate from the actual trade documentation (e.g. ISDA master agreement). We often review such agreements and you should get in touch with us should you need an update or general sanity check.

The so-called EMIR Refit (Regulation (EU) 2019/834) has made material amendments to the substance and form of the reporting.

Which trades are affected?

In the EU, derivatives outstanding on 29 April 2024 have a transition period of 180 days i.e. until 26 October 2024 to be updated to conform with the new standards. Same for the UK, with the former date being 30 September 2024 and the latter 31 March 2025. Any new trades entered into post the respective first dates will need to comply with the new standards from the outset.

What’s changing

Here are the key changes at a glance:

Additional reporting fields: the number of fields increases from 129 to 203 in the EU and 204 in the UK (one optional, additional field). While not all fields will be applicable to every single product or contract, it is likely that the number of items to report will increase for a significant number of trades. New fields include brand new fields but also amendments to existing ones. A few fields have also been removed.

Standardisation: reports shall going forward be based on ISO 20022 XML standards.

Notional amount reporting: the technical standards include detailed prescriptions around the method for computing notional amount, per product type. There are new reporting fields for notional amount schedules, notional quantities and notional quantity schedules.

Reporting of errors: in the EU, there is a new requirement for the entity responsible for reporting to promptly notify national competent authorities of misreporting or significant issues and errors. The ESMA guidelines bring a number of clarifications on this point, notably qualitative and quantitative tests to determine what qualifies as “significant” in this context. Note that the UK is less granular on that front, requiring entities to notify the authorities of material errors or omissions as soon as they become aware of them but without much more guidance on this.

What you should do now

We encourage asset managers to engage now with the entities that report on their behalf, in order to determine the changes applicable to each situation or fund.

Managers should ask their counterparties how they intend to address the changes for both new and legacy transactions, and if any changes to the delegated reporting services agreement are needed.

From a Compliance standpoint, it is likely that the changes introduced by EMIR Refit will trigger changes to internal policies and procedures. All relevant functions (including risk, middle office, etc.) should be involved to agree on the process forward.

Note that, as a result of the timing difference, asset managers reporting under both EU and UK EMIR will have a period of five months between 29 April 2024 and 30 September 2024 where they will have to report under the new reporting rules in the EU and the existing ones in the UK.

How can Zeidler assist?

We represent buy-side asset managers in their arrangements with reporting counterparties, internal policies and derivatives documentation. Please feel free to get in touch with us. If you have any questions or require support, the Zeidler Legal Team is here to help. Our global team of professionals remains up to date on the latest legal, regulatory and compliance changes affecting the asset management industry.  If you require additional information or assistance, please get in touch with us.

Useful links and sources

EU EMIR

ESMA EMIR reporting page: EMIR Reporting (europa.eu)

Technical standards: Commission Delegated Regulation (EU) 2022/1855 of 10 June 2022 (RTS) and Commission Delegated Regulation (EU) 2022/1860 of 10 June 2022 (ITS)

ESMA final report on Guidelines for reporting under EMIR (14 December 2022).

UK EMIR

FCA EMIR reporting page: Reporting obligation | FCA

The Technical Standards (EMIR Reporting and Data Quality and Miscellaneous Amendments) Instrument 2023

 

Author

Valentin Chantereau