2024 European Market Infrastructure Regulation Refit – Changes to the EMIR Reporting Regime

The European Market Infrastructure Regulation (EMIR)¹ came into force in 2012, with the aim of implementing G20 reforms on derivatives transactions in the EU. EMIR requires, amongst other things, central clearing for over-the-counter (OTC) derivatives and reporting of all derivatives transactions. EMIR applies directly to counterparties established in the EU (EU EMIR). The UK has broadly equivalent rules to EU EMIR, as EU EMIR was onshored into English law following Brexit (UK EMIR). For the purposes of this Update, references to EMIR should be understood as including both EU EMIR and UK EMIR unless indicated otherwise.

EMIR was amended via a Regulatory Fitness and Performance Program (EMIR Refit)² in 2019, which we covered in a previous Sidley Update, EMIR REFIT: Impact on Asset Managers. Further amendments to EMIR Refit come into force in 2024 (2024 EMIR Refit), imposing a revised EMIR reporting framework. The EMIR reporting changes will align with guidance from the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions, which intends to harmonise derivatives reporting.

In this Sidley Update, we set out the new reporting rules under 2024 EMIR Refit and the potential implications for both UK/EU reporting entities and their counterparties. 

EU EMIR and UK EMIR

The 2024 EMIR Refit changes represent the first substantive divergence between the EU EMIR and UK EMIR reporting regimes. Whilst still broadly similar in substance, the two reporting regimes will apply from different implementation dates and will contain some different reporting requirements.

In the EU, new reporting technical standards (RTS)³ and implementing technical standards (ITS)⁴ (together, the EU Reporting Standards) and new RTS on the reconciliation and verification of data (the EU Data Quality Standards)⁵ were published in the Official Journal of the European Union on 7 October 2022. Separately, the European Securities and Markets Authority (ESMA) published further guidance and instructions for EU counterparties and trade repositories (TRs) on 14 December 2022 via an ESMA Final Report⁶, as covered in our UK/EU Investment Management Update (January 2023). The Final Report provides practical guidance on the implementation of the new rules and supplements any guidance published by an EU national competent authority (NCA).

In the UK, the FCA published its final reporting rules on 23 February 2023, via new technical standards instruments that amend UK EMIR and revoke the current EU RTS in the UK (the FCA Reporting Standards), and provide procedures for TRs to ensure data quality (the FCA Data Quality Standards).⁷ The FCA also published a Policy Statement⁸ to support the implementation of the new requirements. Although the UK rules are similar to the EU rules, there are key differences that we consider further below.

The respective implementation dates are: 

• EU EMIR – 29 April 2024 
• UK EMIR – 30 September 2024

The new rules under UK EMIR come into force at a later date than EU EMIR. As such, during the five-month period between the implementation dates, reporting entities that currently report under both EU EMIR and UK EMIR will temporarily have to report under both the old reporting rules (under UK EMIR), and the new reporting rules (under EU EMIR). 

Reporting entities will also be obligated to update reports for outstanding derivatives trades to comply with the new requirements. This must be done within six months of the relevant implementation date. The respective deadlines to update existing reports are: 

• EU EMIR – 26 October 2024
• UK EMIR – 31 March 2025

Reporting Changes

As with EMIR in its current form, 2024 EMIR Refit will not impose direct reporting obligations on non-UK or non-EU entities. However, EU and UK reporting entities will need to ensure that all EMIR reporting of derivatives trades complies with the 2024 EMIR Refit requirements. Counterparties should consider the impact of the new rules and evaluate whether any modifications are required to reporting systems and internal procedures.

The key changes to the reporting regime are set out below. 

1. Reporting Format — Reporting entities must ensure that any reports submitted to TRs comply with the standardised ISO-20022-XML template, the same format used for the Securities Financing Transactions Regulation (SFTR) and the Markets in Financial Instruments Regulation (MiFIR). 

a. Many reporting entities will have to update the format they use to report to TRs to accommodate ISO 20022 XML. 

b. Pursuant to the EU and FCA Data Quality Standards, TRs recognised by the respective regimes will reject any files not compliant with the new format, providing information to the reporting entity regarding data verification and any rejection feedback within 60 minutes of the receipt of the data. This feedback, which will now include specific error codes and messages, will also be provided in an XML format. 

c. ESMA has also published updated validation rules (the Validation Rules)⁹ so that all market participants are fully aware of the changes.

2. Reporting fields — 2024 EMIR Refit introduces an increased number of reporting fields. The new reporting fields, many of which will apply only to certain assets or contract types, are set out in the respective EU/UK legislation.

a. EU EMIR — The reporting fields increase from 129 to 203. The full set of fields is set out in the Annex of the EU Reporting Standards. The ESMA Final Report offers further guidance and explanatory comments for users on how to report under these new fields, at Tables 1-3 (from page 235).

b.UK EMIR — The reporting fields increase from 129 to 204 (the UK’s additional field, which is optional, is for identifying the execution agent). The full reporting fields are set out in the Annex of the FCA Reporting Standards. 

3. Unique Product Identifier Code — Reporting entities will be obligated to use Unique Product Identifier (UPI) codes to report most derivatives trades. Counterparties should only provide one identifier.

a. ISIN codes should only be used for transactions that are

i. admitted to trading or traded on a trading venue or
ii. traded on a systematic internaliser and the underlying is admitted to trading or traded on a trading venue, or is an index or basket composed of instruments traded on a trading venue.

b. In the U.S., certain rules go live from 29 January 2024, which will require counterparties to identify all Commodity Futures Trading Commission–regulated swaps in their records (other than swaps in the commodities asset class) via a UPI. These UPIs, issued by the Derivatives Service Bureau and recognised globally, will likely be included on trade confirmations issued by counterparties.

4. Unique Trade Identifier — For derivatives reports concluded after the implementation date of 2024 EMIR Refit, a specific Unique Trade Identifier (UTI) will be used to update the state of these reports. 

a. Counterparties should use a specific UTI for one single derivative transaction, and the UTI must be identical in the reports of both counterparties.  

b. Unlike the UPIs, which are generated by the Derivatives Service Bureau, the UTIs are to be generated by one of the counterparties to the derivatives transaction following the ISO23897 format, which consists of the legal entity identifier of the generating entity, followed by an alphanumeric code containing up to 32 characters.

c. TRs will not reject reports due to UTIs that are not fully compliant with the new requirements for derivative transactions concluded before the reporting start date.

5. Position Level Reporting — 2024 EMIR Refit introduces a requirement for express bilateral agreement between counterparties before reporting can be done at position level. Otherwise, counterparties must report at trade level. 

6. Notification Obligation — 2024 EMIR Refit introduces changes to counterparties’ obligations to notify regulatory authorities of reporting issues, errors, and omissions.

a. EU EMIR applies a metric-based approach, which is set out in detail in the reporting ITS and the ESMA Final Report (page 183). Counterparties are obliged to promptly notify NCAs of

i. misreporting caused by flaws in the reporting system that would affect a significant number of reports
ii. any reporting obstacles preventing reports from being sent to TRs within the reporting deadline or 
iii. any significant issue resulting in reporting errors that would not cause rejection of the report by a TR, in accordance with the data quality standards.

The Validation Rules include a proscribed template for the submission of reporting issues to the relevant NCA.

b. UK EMIR applies a less prescriptive obligation. Counterparties must simply notify the FCA of any material errors or omissions in reporting. The FCA maintains a web-based template on its website for submission of UK EMIR breach notifications.¹⁰

Conclusion

Reporting entities based in the UK/EU must be aware of the 2024 EMIR Refit reporting requirements and ensure that appropriate procedures are in place to report under the updated rules. Entities that currently complete their own EMIR reporting may need to make changes to their current reporting systems and processes to ensure compliance with the new reporting framework. 

Counterparties not currently responsible for reporting should be aware that EU/UK-based reporting counterparties may request new data in order to comply with the new reporting obligations. As such, nonreporting counterparties may be required to update onboarding forms and reporting templates, for example, to capture additional information. 

¹ 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.

² “REFIT” refers to the European Commission’s Regulatory Fitness and Performance programme, which emphasises the need for cost reduction and simplification so that EU policies achieve their objectives in the most efficient way and aims in particular at reducing regulatory and administrative burdens.

³ Commission Delegated Regulation (EU) 2022/1855.

⁴ Commission Delegated Regulation (EU) 2022/1860.

⁵ Commission Delegated Regulation (EU) 2022/1858.

⁶ ESMA Final Report – Guidelines for reporting under EMIR (14 December 2022).

⁷ FCA Standards Instruments: the Technical Standards (EMIR Reporting and Data Quality and Miscellaneous Amendments) Instrument 2023 and the EMIR Rules (Procedures for Ensuring Data Quality) Instrument 2023.

⁸ FCA/BoE Policy Statement PS23/2 – Changes to reporting requirements, procedures for data quality and registration of Trade Repositories under UK EMIR – feedback on CP21/31 and our final rules and guidance (February 2023).

⁹ Available to download as an Excel spreadsheet from https://www.esma.europa.eu/press-news/esma-news/esma-publishes-guidelines-and-technical-documentation-reporting-under-emir (20 December 2022). 

¹⁰ https://www.fca.org.uk/markets/uk-emir/reporting-obligation