European Market Infrastructure Regulation (EMIR)
What is EMIR?
The European Market Infrastructure Regulation (EMIR) introduced an obligation to report all derivatives to trade repositories; a clearing obligation for eligible OTC derivatives, measures to reduce counterparty credit risk and operational risk for bilaterally cleared OTC derivatives, as well as common rules for central counterparties (CCPs) and for trade repositories.
EMIR Level 1 and 2 validations – historical timeline
The EU regulation on OTC derivatives, central counterparties and trade repositories came into force on 16 August 2012. However, full implementation required ESMA to finalise around 20 sets of technical standards, which came into force from 2014. Key dates in the EMIR implementation timetable are below:
- Operational risk management of non-cleared OTC derivatives – 2013.
- Reporting of OTC derivatives and ETDs to a trade repository – 12 February 2014
Firms are required to back- report derivative contracts as follows:
- Back reporting of derivative contracts outstanding on 16 August 2012 (and still outstanding on reporting start date) – within 90 days of reporting start date for that asset class
- Back reporting derivatives entered into before, on or after 16 August 2012 that are no longer outstanding on reporting start date – theoretically reportable within three years of the reporting start date for that particular asset class
Introduction to the revised EMIR RTS (Regulatory Technical Standards)
The revised RTS and ITS on reporting under Article 9 of EMIR were published in the Official Journal on 21 January 2017. They enter into force on 10 February 2017 and will become applicable on 1 November 2017. The revised EMIR RTS is expected to be far more complex than the current validation. There are significant changes expected including:
- An increase in number of fields from 85 to 129
- Validation rules specified for the reports both at trade and position level.
- Validation rules dependent on each Action Type
- More detailed instructions with respect to N/A values
UnaVista Trade Repository timeline for the revised EMIR RTS
- Go-live - UnaVista Trade Repository EMIR RTS system will go live on Monday, 30 October 2017 to allow for proper deployment and testing procedures to be conducted over a weekend.
- UAT (User Acceptance Testing) - UnaVista opened the UAT environment on Monday 4 September to support the 30 October go-live. Clients have begun testing.
Which firms will be affected?
- All counterparties to all derivative transactions
- Includes financial and non-financial counterparties
- Under EMIR, a counterparty outside the EU does not have to report to a trade repository
How will EMIR affect you?
Key points at a glance
- Covers all derivative transactions - Equity, interest rate, currency, commodity, credit, “other” - Includes OTC and exchange traded derivatives - Differs from Dodd Frank by including ETDs - No exemptions for “non-EEA derivatives” - Trading venue and underlying assets are irrelevant - No exemptions for index or basket products - Includes retail derivatives such as spreadbets - Exchange traded warrants are not included
- No threshold below which transactions are not reportable
- Includes modifications: - Novations - Terminations and partial terminations
Trade repositories will receive derivative trade details from different sources and make the information available to all relevant regulators (and a subset of information to the public). Regulators intend that the trade repository information will:
- Help detect systemic risk through position information
- Increase transparency to the market leading to greater market understanding and increased confidence
- Determine and manage counterparty exposure in even of a firm collapse
How can UnaVista help you with EMIR?
UnaVista can assist you with a number of regulations, so that you don’t have to build separate solutions for each problem, future regulations can then be catered for through the platform when required.
UnaVista is an ESMA approved trade repository across all asset classes. We ran a pilot service for clients that allowed customers to test the service before the February 2014 'go-live' date and will be doing the same for the revised EMIR RTS starting 4 September 2017 when our UAT (User Acceptance Testing) environment becomes available for client. Download the revised EMIR RTS field specification here.
There are a number of reasons the UnaVista is well positioned to assist with your EMIR trade reporting:
- Use one connection to UnaVista for EMIR and MiFID/II - UnaVista currently operates as a European Approved Reporting Mechanism (ARM) under the MiFID regime for all asset classes and markets. By becoming a trade repository for all asset classes across all venues, customers will only need to connect once to meet both their EMIR and MiFID/II reporting requirements.
- Use our European regulatory experience - London Stock Exchange Group has been at the forefront of helping clients with European regulations for decades. We are a trusted, neutral and regulated venue already providing many regulatory services such as Regulatory News Service (RNS), National Numbering Agency (ISIN) and regulatory reporting (UnaVista).
- Use our regulatory reporting experience - As a market leading MiFID Approve Reporting Mechanism (ARM), UnaVista reports c1 billion multi-asset transactions annually to multiple regulators, including over 300 million derivatives on behalf over 600 clients. Our trade repository will harness the power of our transaction reporting service.
- STP from CCPs part of the LSE Group - As well as connecting to all European CCPs, firms will be able to report straight through from the CCPs that are part of the LSE Group, making the most of our Group’s infrastructure.
- Fulfil other global regulatory requirements through UnaVista - UnaVista can assist you with more than just EMIR and MiFID. The UnaVista’s Rules Engine acts as a central hub for the production of data to meet global regulatory reporting requirements. With linkages to global trade repositories the UnaVista rules engine helps firms to meet global regulations. Using a firm’s source data, our global multi asset class reference data of 5m tradable products and the relevant regulation’s rules logic, the data is enriched and routed to the required destinations. UnaVista also has solutions for various regulations such as Financial Transaction Tax, Short Selling, FATCA and more.
- Fulfil your EMIR reconciliation obligations - UnaVista has a powerful matching and reconciliation engine, allowing you to fulfil your obligation to reconcile your trade with the counterparties before submission. UnaVista will also allow you to match the trades with your counterparties after submission, so you can be sure your data is correct.
- Enrich your data - By connecting to UnaVista you can enrich your data from multiple sources of reference data, including SEDOL Masterfile and entity relationship data.