2024 changes to derivatives reporting requirements

The EU and the UK have published rules that will this year change the EMIR and UK EMIR requirements for reporting derivatives. This reporting is commonly referred to as “Trade Reporting”. The Trade Reporting requirements were initially amended in 2019 by legislation known as “EMIR REFIT”. Among other things, EMIR REFIT also added to the legislation a provision mandating the regulatory authorities to develop technical standards in relation to Trade Reporting. The latest 2024 updates to the Trade Reporting requirements are a result of the technical standards the regulatory authorities have introduced.

Overview

As a result of these changes, buy-side entities will need to do the following:

• firms who currently delegate Trade Reporting:
  • ensure they have access to the information reported on their behalf [1];
  • review the terms of their delegated reporting arrangements to ensure their delegate is obliged to comply with the additional reporting requirements and to inform them of reporting issues should they arise; and
  • provide supplemental information to their delegates so that existing reports can be updated and, if needed, update their delegated reporting arrangements to reflect this.
• firms who do their own Trade Reporting:
  • update their reporting systems to include the additional data fields (noting that different fields will be required for the EU and UK regimes during the transition period between rules coming into force); and
  • update reports for outstanding transactions to include the additional data fields.
• firms who report on behalf of others will need to: 
  • ensure they obtain the additional information needed from their client in order to report under the new rules; and 
  • update reports for existing Transactions in line with the new reporting standards.

The key dates are as follows:

   The new EU requirements

The new standards for Trade Reporting by parties subject to the EU rules commence on 29 April 2024.  These provide the following.

• New reporting standards, formats, frequency, methods and arrangements. 
• New ESMA guidelines on reporting, which aim to enhance harmonisation and standardisation of reporting.
• The number of reportable fields increases from 129 to 203.
• There are new minimum details of the data to be reported and the type of reports to be used. 
• For relationships subject to Mandatory Reporting [2] (which applies to EU NFC-s when dealing with EU FCs, but not UK FCs), the EU NFC- needs to continue to provide the EU FC with details the EU FC couldn’t reasonably be expected to possess, such as whether the derivatives are limited to commercial or treasury activity. This obligation will extend to the new data fields. 
• In addition, the guidelines require the EU FC to put in place arrangements to allow any NFC- with Mandatory Reporting in place to:
  • renew its Legal Entity Identifier (LEI) regularly;
  • inform the reporting FC on a timely basis about any change to the NFC's +/- status; and 
  • if the NFC decides to start reporting OTC derivatives itself, inform the FC at least ten working days prior to doing so. 
• A counterparty that is obliged to report that suffers significant reporting issues must report this to its National Competent Authority (NCA). If an FC is subject to Mandatory Reporting, it must also report to the NCA of the NFC- . However, if Mandatory Reporting does not apply and an NFC has delegated Trade Reporting to a counterparty or service provider who suffers a reporting issue, then it is the NFC who must ensure that this is reported to its NCA. This is because, unlike for Mandatory Reporting, a counterparty or service provider has no direct obligation to report to the client’s NCA, although it may be obliged to inform the NFC of the reporting issue under the terms of its delegated reporting agreement. ESMA has published a template for notifying NCAs of these issues.
• ESMA reporting guidelines state that an FC that provides mandatory reporting on behalf of an NFC- should give the NFC- access to the information that is reported on its behalf.
• Firms have a remediation obligation for derivatives that are currently outstanding on 29 April 2024. Firms will need to provide supplemental information for those outstanding derivatives by 26 October 2024 so that the level of information disclosed is the same as that for new derivatives that are entered into from 29 April 2024 onwards.

New UK requirements

The UK will be implementing much the same changes as those that apply in the EU, but five months later. The commencement date for the UK reporting requirements is 30 September 2024.  The date by which remediation of the additional information regarding derivatives outstanding on 30 September 2024 is required is 31 March 2025.

Other than the implementation dates, there are relatively few differences between the two new regimes.

• The UK has one extra reportable field (for the identification of an execution agent), taking the total to 204.   
• The threshold for what constitutes an intragroup derivative is different. 
• The UK has a field for reporting TONAR.
• UK has different validation rules.

As before, a UK FC is also obliged to carry out Mandatory Reporting under the equivalent UK rules for its counterparty if that counterparty is a UK NFC- . However, this mandatory obligation does not apply when the UK FC’s counterparty is an NFC- located outside the UK. This position has not been affected by the 2024 updates.

Further detail

EU rules

Primary legislation:

• Commission Implementing Regulation (EU) 2022/1860 – reporting standards, formats, frequency, methods and arrangements. Repeals Implementing Regulation (EU) No 1247/2012.
• Commission Delegated Regulation (EU) 2022/1855 – minimum details of the data to be reported and the type of reports to be used. Repeals Delegated Regulation (EU) No 148/2013.

Existing ESMA guidance:

• ESMA Q&A on EMIR Implementation
• EMIR Validation Table
• ESMA Final Report - Guidelines for reporting under EMIR

UK rules

• FCA Standards Instrument: The Technical Standards (EMIR Reporting and Data Quality and Miscellaneous Amendments) Instrument 2023
• Bank Standards Instrument: The Technical Standards (EMIR Reporting and Data Quality and Miscellaneous Amendments) Instrument 2023
• PS23/2: Changes to reporting requirements, procedures for data quality and registration of Trade Repositories under UK EMIR 

Existing FCA guidance:

• FCA guidance, validation rules and schemas

[1] Some national competent authorities (e.g. the Central Bank of Ireland) already expect the firms they supervise to have access to this information and so to some extent the new rules can be seen as harmonising this requirement.

[2] Under Article 9(1a) of EMIR