2024 UK EMIR Refit: finalisation of Q&A-style guidance

On 30 September 2024, significant changes to the UK’s derivatives reporting framework will come into effect known as the “2024 UK EMIR refit”. Counterparties are in the process of finalising implementation projects to reflect the revised Article 9 reporting requirements under the UK version of the European Market Infrastructure Regulation (“UK EMIR”), having negotiated similar changes in relation to EU EMIR, which took effect on 29 April 2024. The UK Financial Conduct Authority (“FCA”) and Bank of England (“BoE”) (together the “Supervisory Authorities”) are currently in the process of finalising Q&A-style guidance designed to help counterparties with implementing the new UK requirements.

Background

From 1 to 28 March 2024, the Supervisory Authorities ran a joint consultation on the first tranche of topics covered by the Q&A (summarised below). The finalised Q&A for this first tranche of topics were published on 2 May 2024. On 2 May 2024, the Supervisory Authorities opened their second joint consultation on another tranche of topics (summarised below), which is due to close on 12 June 2024.

First tranche of Q&A topics

In the first joint consultation, the Supervisory Authorities sought feedback on Q&As grouped under the following topics 1-5: 

1. Transitional arrangements – arrangements for transitioning to the updated reporting framework during the transition period from 30 September 2024 to 31 March 2025. Derivatives trades entered into prior to 30 September 2024 will have a 6-month transition period (30 September 2024 to 31 March 2025) for entities responsible for reporting to bring the relevant reports into compliance with the updated reporting framework. Newly entered or modified derivative trades will need to comply with the new requirements from 30 September 2024.

2. Reconciliations – processes for reconciling data between trade repositories. Trade repositories must establish procedures and policies to ensure improved data quality and effective reconciliation of data between trade repositories.

3. Errors and omissions – guidance as to how errors and/or omissions in UK EMIR reporting should be approached, confirming that reports should be made in respect of “material” errors and omissions (as has largely been market practice to date).

4. Derivative identifiers – guidance as to how Unique Product Identifiers (UPIs), Unique Transaction Identifiers (UTIs) and Legal Entity Identifiers (LEIs) should be reported.

5. Actions and events – guidance as to how different action types and events should be reported. The revised UK EMIR requirements introduce a new action type (“Revive”), which can be used when re-opening a derivative at trade or position level.

Second tranche of Q&A topics

The Supervisory Authorities are currently seeking feedback on topics 6-11 of the draft Q&As, alongside some additional Q&As under topics 1 (1.12), 4 (4.10 – 4.11) and 5 (5.7) referred to above:  

6. Venues – guidance as to how to accurately report the venue where a derivative was executed.  

7. Exchange Traded Derivatives – guidance on reporting various fields for Exchange Traded Derivatives, such as the Reporting Submitting Entity ID field, the Master Agreement Type field and the Execution Timestamp field.

8. Margin and collateral – guidance as to how to report margin and collateral. Under the revised UK EMIR requirements, the reporting framework separates data on margin and collateral into a new table.

9. Clearing – guidance on populating form fields related to clearing, including how to report a trade that is subject to the clearing obligation under UK EMIR, but not yet cleared to be reported.

10. Position level reporting – guidance on how to report outstanding derivatives together as a position. For example, how to report positions that are opened and closed on the same day.

11. Asset class and product specific – guidance on how to report certain derivative asset classes and derivative products such as derivates based on cryptoassets.

UK EMIR Validation Rules

In certain circumstances, the Q&A will also require a corresponding change to the UK EMIR Validation Rules (applicable from 30 September 2024) to address industry feedback and correct identified errors. These changes are indicated within the relevant draft Q&As in the consultation.

Next Steps

The Supervisory Authorities are inviting feedback on the draft Q&A and the corresponding changes to the UK EMIR Validation Rules applicable from 30 September 2024. The second consultation closes on 12 June 2024. All feedback received will be considered by the Supervisory Authorities and a finalised set of Q&As will be published on their websites shortly afterwards.

 Should you have any questions in relation to the 2024 UK EMIR Refit or derivatives reporting generally, please contact any of the named contacts, or your usual CMS contact.

Article co-authored by Felisa Smith, Trainee Solicitor at CMS