Question marks remain despite the completion of the UK’s Financial Conduct Authority (FCA) and Bank of England (BoE) recently completed three-month consultation paper on the UK European Market Infrastructure
Regulation UK EMIR) reporting regime.
As Eve Bjonness, senior consultant at Capco, notes, “The closing of today’s consultation is a positive step towards ensuring UK derivatives reporting will better align with international standards to ensure a more globally consistent data set.
However, industry participants and the International Swaps and Derivatives Associated (ISDA) have expressed concern over a lack of guidance on the timeline for change and implications for delays.”
In the post Brexit world, the proposals aim to align the UK EMIR or the country’s derivatives reporting framework with international guidance from the Committee on Payments and Market Infrastructures and International Organisation of Securities Commissions (CPMI-IOSCO) to safeguard a more globally consistent data set.
They recommended measures for mandatory delegated reporting requirements, counterparty notifications and reconciliations processes as well as the use of XML schemas and global identifiers.
The FCA also proposed new rules for trade repositories regarding registration and reconciliation processes in order to streamline the process for registration
The UK watchdog also plans to issue a new specialist sourcebook for the data harmonisation rules – the UK EMIR Rules (EMIRR), in the FCA Handbook.
Bjonness believes that one of the main concerns are the repercussions of single-sided mandatory delegated reporting and the use of Unique Product Identifiers (UPIs) to identify OTC derivatives contracts.
She believes that the delay in providing revised validation rules, reconciliations, and tolerance levels has also caused apprehension with the expectation of increased data quality and reporting failures in the early stages, and a request for a cooling off period looking likely to avoid penalties.
“The introduction of the new ISO 20022 XML schema format is of particular concern for smaller market participants, who may have less sophisticated reporting processes and systems,” she says,
She adds, “Further guidance has also been requested for the reporting of futures and options executed on a non-equivalent third country exchange given the different reporting requirements for OTC and ETD derivatives, as these would be considered an OTC derivative contract as part of the EMIR regulation.”
Bjonness also flags issues with the EMIR UK and EU consultation timelines being at different stages.
“The industry could face a scenario whereby any go-live date for those market participants who have reporting obligations under both UK and EU EMIR will be determined by the UK go-live date, especially with the ongoing delays of the European Commission approving the report on technical standard (RTS) under EMIR regulatory fitness and performance programme (REFIT),” she adds.
She says, “Given the delay and the 18-month implementation period, the industry should anticipate the go-live date for the REFIT will be Q4 2023 or Q1 2024.”
©Markets Media Europe 2022
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