Joint Bank of England and FCA policy statement sets out amendments to Technical Standards and new rules for trade repositories relating to EMIR derivatives reporting.
In November 2021, the FCA and the Bank of England consulted on proposals to amend the framework for derivatives reporting under the UK version of EMIR (UK EMIR).
Proposals aimed to align UK derivatives reporting with international guidance issued by the CPMI-IOSCO, where appropriate, to ensure a more globally consistent dataset.
Also proposed measures on mandatory delegated reporting rules, counterparty notifications, registration and reconciliations processes, and the use of XML schemas.
Proposals aimed to provide clarity to counterparties and trade repositories (TRs), including areas where there are discrepancies on how certain data fields are reported.
FCA proposed new targeted rules for TRs in relation to registration and reconciliation processes, to streamline the process for registration, ensure consistency of reporting.
These proposals aimed to ensure a high-quality derivatives dataset; necessary to allow accurate and appropriate view of the market and to fulfil their statutory objectives.
A harmonized derivatives dataset would also help to facilitate effective systemic risk and financial stability monitoring in a more globally consistent manner.
Joint PS summarizes the feedback received to CP21/31; also sets out final rules and approach to supporting guidance required to support implementation of the proposals.
Proposal 1: Derivatives Reporting
FCA and Bank will amend table of reportable fields in the relevant technical standards under UK EMIR, so that it aligns with international guidance issued by CPMI-IOSCO.
Will make specific changes to reportable fields to provide clarity to counterparties, TRs.
And introduce notification and reconciliation processes for counterparties so errors are notified to appropriate regulator, and reconciliation breaks are resolved quickly; 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.
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 standardized XML schemas based on end-to-end reporting solutions in the ISO 20022 standards when submitting details of their derivatives trades to a trade repository.
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 CP21/31, 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 (see below).
In line with proposals in CP21/31, consequential amendments are being made to UK versions of Commission Delegated Regulation 149/2013, Commission Delegated Regulation 151/2013, and Commission Delegated Regulation 2016/957.
Proposal 2: TR Registration Process
The FCA will streamline the registration process for TRs that are already registered or recognized under the UK Securities Financing Transactions Regulation (UK SFTR).
As noted in CP21/31, the FCA is implementing this by amending the UK versions of EC Delegated Regulation 150/2013 and EC Implementing Regulation 1248/2012.
Proposal 3: TR Data Rules
FCA will introduce new requirements for TRs which will improve data quality, promote consistency of reporting, and facilitate transfer of data between TRs and to 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.
In response to feedback, they are finalizing key proposals above largely as consulted.
They have, however, made the following additional changes in response to consultation feedback to further enhance implementation and provide additional clarifications:
Introduction of a new reportable field to permit reporting of an Execution Agent where counterparties choose to make use of one - see paragraph 2.14 and their response.
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 – see paragraph 4.8 and their subsequent response.
A clarification that TR may generate a UTI as part of UTI generation waterfall process.
And amendment to reporting requirements stating that CCPs are in scope of Article 3.
As set out in Chapter 5, FCA and Bank do not consider that additional changes made will have a material impact on the findings in our original cost benefit analyses (CBA).
FCA and the Bank are also making a number of consequential changes to other pieces of UK legislation, where that legislation false cross-references to provisions of the technical standards which we are proposing to amend or revoke and replace.
Those are intended to ensure that any such cross-references continue to function.
UK FCA Handbook Notice 107
On Feb. 24, 2023, UK FCA issued the final Handbook Notice 107, referencing the final FCA instruments that give effect to the changes set out in policy statement 23/2.
Data Quality Instrument
EMIR Rules (Procedures for Ensuring Data Quality) Instrument 2023 (FCA 2023/3).
Instrument changes Glossary to define EMIRR as the European Market Infrastructure Regulation Rules sourcebook, clarifies the Powers exercised by the FCA in making certain rules in GEN, and requires trade repositories to ensure effective reconciliation of data by trade repositories, the verification of compliance by counterparties and CCPs with the EMIR reporting obligation, and verification of completeness and correctness.
Section 1.1.2R is inserted to clarify that applicable rules and guidance in GEN apply to TRs registered in accordance with Article 55 of Regulation 648/2012 (EMIR).
Section 2.4.2R amends time for which TRs are to provide information necessary for specified parties to review UK EMIR reporting submissions from 06:00 UTC-09:00 UTC.
And Annex C is added to insert EMIRR to the Glossary and to define it as the European Market Infrastructure Regulation Rules sourcebook, and to insert a provision to GEN Sch 4.3 to clarify the legal basis of the power exercised.
New Technical Standards
FCA also issued the FCA Standards Instrument: Technical Standards (EMIR Reporting and Data Quality and Miscellaneous Amendments) Instrument 2023 (FCA 2023/4).
FCA Board has made changes to include new technical standards, including: Technical Standards on the Minimum Details of the Data to be Reported to Trade Repositories.
Table 1 permits the reporting of a new Execution Agent field.
Technical Standards on the Standards, Formats, Frequency and Methods and Arrangements for Reporting: article 3 extends the scope of the requirements to include CCPs; and article 8 adjusts the UTI generation waterfall process to clarify that TRs may generate a UTI, and table 1 permits the reporting of a new Execution Agent field.
Instrument sets out notifications/reconciliation processes for counterparties, mandates certain delegated reporting requirements, requires use of standardized XML schemas.
TR Registration Instrument
The FCA also issued the Technical Standards (EMIR Registration of Trade Repositories and Miscellaneous Amendments) Instrument 2023 (FCA 2023/5).
Makes changes to details and format of application for registration as trade repository, and to the rules governing access by relevant authorities to certain transaction data.
Technical Specification Documents
Alongside the PS and final rules, FCA are also publishing the following technical specification documents to support implementation: draft UK EMIR Validation rules (applicable from Sep. 30, 2024); XML Schemas under UK EMIR (applicable from Sep, 30, 2024) (see incoming messages and outgoing messages).
Would welcome feedback from firms on the draft validation rules and XML schemas.
Send comments by Mar. 24, 2023; will publish final versions of the rules and XML schemas, incorporating any feedback where appropriate, shortly after Mar. 24, 2023.
Visit BoE's Trade Repository Data Collections page for more details.
Effectiveness
Requirements that have been set out in this PS will come into effect on Sep. 30, 2024.
Except for certain amendments to the UK versions of Commission Regulation 150/2013 and Commission Regulation 1248/2012, which relate to the format and details of applications for registration of TRs, and which come into force immediately.
As noted in CP21/31, will be 6-month period for counterparties to update outstanding derivative reports in line with new requirements, which will end Mar. 31, 2025.
Stakeholders should familiarize themselves with final rules, plan and appropriately update their systems and processes ahead of implementation.
