As of 12 February 2014, the EU’s European Market Infrastructure Regulation (EMIR)¹ has required counterparties to derivatives contracts to report their derivatives contracts to a trade repository (EMIR reporting). On 10 June 2022, the European Commission adopted new Regulatory and Implementing Technical Standards regarding EMIR reporting details (EMIR Refit). The purpose of the amendments is to ensure the efficient use of the derivatives data in trade repositories, to ensure the high quality of the data and to facilitate data collection, aggregation and comparison across trade repositories. The new standards will apply from 29 April 2024 and the European Securities and Markets Authority (ESMA) has issued new guidelines on their application². The new standards are listed at the end of this article, but the FIN-FSA would like to highlight some of the key changes below.

Changes in reporting format and contents

The technical format for reporting derivative contracts to trade repositories will change as the new standards enter into force. According to the new standards, reports shall be submitted to trade repositories in the ISO 20022 XML format³ harmonised on EU level.

The new standards will also bring several changes to the data reported on derivative contracts. The brand-new reportable fields and changes to definitions of pre-existing fields are largely based on internationally agreed descriptions of critical data elements for derivatives⁴. For example, the amendments require that almost all derivatives shall be identified by either an ISIN or a UPI code. The ISIN code is used for commodity derivatives traded on trading venues whereas the UPI code is used for other derivatives (OTC derivatives). Going forward, the entity responsible for the reporting in accordance with Article 9 shall be separately identified in the reporting of OTC derivatives. Furthermore, the logic for determining the buyer and seller will be specified for certain types of contracts. For example, for interest rate swaps, the report no longer specifies buyer and seller, which are instead replaced with payer and receiver of each leg of the derivative. The report will also contain a new field titled ‘Event date’, which enables counterparties to retroactively correct their submissions.

Under transitional provisions, reporting counterparties have six months to update the reporting of any derivatives outstanding on 29 April 2024 to trade repositories to ensure that these reports comply with the new reporting requirements. Any changes to outstanding derivatives must be reported directly in the new format, also during the transition period. Otherwise, the schedule for introducing the new standard during the transition period is left to the discretion of the reporting entities. It is not necessary to update derivative contracts that mature during the transition period to the new reporting format.

Obligation to report errors and obstacles to reporting

The regulation will introduce a new obligation to notify the competent authority of errors in and obstacles to EMIR reporting. Going forward, the entity responsible for reporting shall notify its competent authority, in Finland the FIN-FSA, of any of the following instances:

a) any misreporting caused by flaws in the reporting systems that would affect a significant number of reports,

b) any reporting obstacle preventing the report submitting entity from sending reports to a trade repository within the deadline referred to in Article 9(1) of EMIR,

c) any significant issue resulting in reporting errors that would not cause rejection by a trade repository.

The entity responsible for reporting shall promptly notify any of those instances, as soon as it becomes aware of them.

The obligation applies specifically to the entity responsible for reporting – not the report submitting entity – which means that financial counterparties (FCs) and non-financial counterparties above the clearing threshold (NFC+) are responsible for notifying their respective competent authorities of any reporting errors and obstacles. This applies even if the entity responsible for reporting has delegated its EMIR reporting to a counterparty or a third party service provider. This also means that when a financial counterparty is, directly by virtue of EMIR, responsible for reporting OTC derivatives with a non-financial counterparty below the clearing threshold (NFC-) to a trade repository also on behalf of its counterparty, the financial counterparty shall also notify the competent authority of that counterparty of any reporting errors or obstacles.

The new standards do not specify the severity of a reporting error or obstacle that, in practice, triggers the obligation to report it to the competent authority. However, ESMA has provided more detailed guidance on different instances that give rise to the reporting requirement⁵. ESMA has also published a template for submitting notifications under the new standards. The FIN-FSA will adopt the template and publish it on the EMIR website of the FIN-FSA.

Obligation to monitor the reconciliation feedback provided by trade repositories

Under the new regulation, trade repositories will be obligated to reconcile the data of certain reporting fields regarding derivatives and to provide report submitting entities with the results of the process within 60 minutes of the completion of the reconciliation process. Trade repositories shall also make the reconciliation data available to reporting counterparties and entities responsible for the reporting at the end of the day. Report submitting entities, counterparties and entities responsible for reporting shall in turn be required to have in place arrangements which ensure that the feedback on the reconciliation failures provided by the trade repositories is taken into account. However, no further details on these arrangements are laid down in the standards.

Some other relevant changes

In addition to the reconciliation, trade repositories will be required to verify certain data in derivatives reports upon reception and to provide the report submitting entity with information on the outcome of the verification within 60 minutes. A trade repository must reject reports which do not comply with the requirements laid down in the Commission's regulatory technical standard. ESMA has specified these requirements in its validation rules. The entity responsible for reporting will be deemed non-compliant with its EMIR reporting obligations if the notification rejected by the trade repository is not corrected and re-submitted within the time limit set in Article 9(1) of EMIR.

One practical problem with EMIR reporting has been that counterparties do not verify the validity of their legal entity identifiers (LEI). To remedy this, the new standards will require counterparties and entities responsible for reporting to explicitly ensure that the LEI is renewed. In addition, financial counterparties responsible for reporting OTC derivatives on behalf of their non-financial counterparties are required to have in place a number of new arrangements for reporting, including arrangements to ensure the timely renewal of non-financial counterparties’ LEIs.

New technical standards

• COMMISSION DELEGATED REGULATION (EU) 2022/1855 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards specifying the minimum details of the data to be reported to trade repositories and the type of reports to be used
• COMMISSION DELEGATED REGULATION (EU) 2022/1858 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards specifying the procedures for the reconciliation of data between trade repositories and the procedures to be applied by the trade repository to verify the compliance by the reporting counterparty or submitting entity with the reporting requirements and to verify the completeness and correctness of the data reported
• COMMISSION DELEGATED REGULATION (EU) 2022/1856 amending the regulatory technical standards laid down in Delegated Regulation (EU) No 151/2013 by further specifying the procedure for accessing details of derivatives as well as the technical and operational arrangements for their access
• Commission Implementing Regulation (EU) 2022/1860 laying down implementing technical standards for the application of Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to the standards, formats, frequency and methods and arrangements for reporting.

For further information, please contact:

• Jyrki Manninen, Chief Legal Advisor, jyrki.manninen(at)fiva.fi, tel. +3589 183 5205
• Juho Westerlund, Senior Supervisor, juho.westerlund(at)fiva.fi, tel. +3589 183 5310

¹ Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories.
² Guidelines for reporting under EMIR ESPA74-362-2281.
³ XML EMIR Reporting Schemas (Incoming messages), available on ESMA's EMIR website. Reporting entities are also encouraged to monitor information provided by trade repositories regarding, for example, testing.
⁴ CPMI – IOSCO: Harmonisation of critical OTC derivatives data elements (other than UTI and UPI) – Technical guidance
⁵ Guidelines for reporting under EMIR ESMA74-362-2281, Section 3.29 Ensuring data quality by counterparties.