UK FCA - Changes to reporting requirements, procedures for data quality and registration of Trade Repositories under UK EMIR

The FCA, the UK financial regulator, has published a policy statement (click here) announcing changes to the UK EMIR derivative reporting regime. This policy statement follows a joint consultation by the FCA and the Bank of England (click here) launched in November 2021.

The changes are aimed at aligning the UK derivatives reporting framework with international guidance issued by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) to help ensure a more globally consistent dataset.

While the UK EMIR regime is mostly aligned with the EU EMIR equivalent from a reporting perspective, the UK was yet to adopt the (significant) changes proposed by ESMA in their December 2020 final report. The changes announced by the FCA are predominantly aligned with the ESMA reporting framework changes but take into consideration feedback from UK counterparties and Trade Repositories (TRs).

There is a strong preference from market participants that operate in both the UK and EU to align the reporting approach as far as possible to avoid any unintended cost and/or operational burden that would arise from any regulatory divergence.

The key changes are summarized below:

• Amending the table of reportable fields in the relevant technical standards under UK EMIR, primarily so it aligns with international guidance issued by CPMI-IOSCO.
• Notifications and reconciliation processes for counterparties to help ensure that errors and omissions are notified to the appropriate regulator, and reconciliation breaks are resolved quickly.
• There will be specific requirements for counterparties subject to mandatory delegated reporting. UK EMIR requires non-financial counterparties (NFCs) who benefit from mandatory delegated reporting when trading derivatives with a financial counterparty (FC) to provide information to the FC that the FC would not otherwise be expected to know. The FCA set out the arrangements the FC should put in place for the timely provision of relevant information by the NFC.
• Counterparties will be required to use standardised XML schemas based on end-to-end reporting solutions in the ISO 20022 standards when submitting details of their derivatives trades to a TR.
• The FCA will require counterparties to follow specific requirements for the use of global identifiers, including the use of Legal Entity Identifiers (LEIs), Unique Transaction identifiers (UTI) and Unique Product Identifiers (UPIs).
• As noted in the consultation, the FCA is implementing this by introducing the EMIR Technical Standards on the Minimum Details of the Data to be Reported to Trade Repositories 2023 and EMIR Technical Standards on the Standards, Formats, Frequency and Methods and Arrangements for Reporting 2023.

Proposal 2: amendments to the registration process for TRs (FCA)

• The FCA will streamline the registration process for TRs that are already registered or recognised under the UK Securities Financing Transactions Regulation (SFTR).
• As noted in the consultation paper, the FCA is implementing this by amending the UK versions of Commission DelegatedRegulation and Commission Implementing Regulation. These changes are aimed at aligning the registration processes under UK EMIR and UK SFTR.

Proposal 3: requirements for TRs to establish procedures and policies to ensure the effective reconciliation of data between TRs; to verify the completeness and correctness of the data reported; and the orderly transfer of data between TRs (FCA)

• The FCA will introduce new requirements for TRs which will improve data quality, promote consistency of reporting, and facilitate the orderly transfer of data between TRs and to regulatory authorities.
• The FCA is implementing this by introducing a new sourcebook in the FCA Handbook, called the European Market Infrastructure Regulation Rules, or EMIRR for short.

Additional Changes not proposed in the original consultation:

In addition to the three topics originally consulted on, the FCA has also made the following changes in response to consultation feedback:

• The introduction of a new reportable field to permit the reporting of an ‘Execution Agent’ where counterparties choose to make use of one,
• The amendment of the time by which TRs are to provide the information necessary for specified parties to review their UK EMIR reporting submissions from 06:00 UTC to 09:00 UTC,
• A clarification that a TR may generate a UTI as part of the UTI generation waterfall process, and
• An amendment to the reporting requirements to clarify that CCPs are in scope of Article 3 .
• The FCA and the Bank of England are also making several ‘consequential changes’ to other pieces of UK legislation, where that legislation contains cross-references to provisions of the technical standards which they are proposing to amend or revoke and replace.

The requirements will come into effect on 30 September 2024 (EU EMIR’s changes come into effect in April 2024), except for certain amendments which relate to the format and details of applications for registration of TRs, which come into force immediately.

RegTrail Insight

The pragmatic approach from the FCA and Bank of England in keeping EU and UK reporting requirements largely aligned will be appreciated by many, including those with reporting obligations in both jurisdictions. Still, energy and commodity firms that self-report are advised to commence the necessary internal projects without delay given the scale of the reporting changes despite firms with EU EMIR Refit experience having a head start. It is not yet clear what position the UK is likely to take regarding “EMIR 3.0”. RegTrail will continue to track this topic and report on any developments.