FCA Discussion Paper – Improving the UK transaction reporting regime
As we have already noted in a previous blog post, with the departure of the UK from the EU, it was expected that at some point the transaction reporting regimes of both jurisdictions would begin to diverge. Now it appears that this process is picking up steam, as the FCA and ESMA are consulting for changes to the MiFIR transaction reporting regime. See our blog post on ESMA’s MiFIR consultation here. On the 15th of November 2024 the FCA published a discussion paper proposing changes to the aforesaid transaction regime. MAP FinTech has already drafted its responses and intends to submit its views to the FCA’s consultation. The FCA is considering the inclusion of additional fields, but the Authority has not provided an exhaustive list for the new inclusions, nevertheless MAP FinTech understands that the proposals as set forth by the FCA imply that any new additions will be less than what ESMA is proposing. See below a non-exhaustive list of changes that FCA is proposing to make. AIFMs and UCITS Management Companies to become subject to the MiFIR reporting requirements UK AIFMS and UCITS Management companies that offer the non-core services of the management of portfolios of investments in accordance with mandates given by investors on a discretionary client-by-client basis, investment advice; safe-keeping and administration in relation to shares or units of collective investment undertakings; and reception and transmission of orders in relation to financial instruments. Will be required to submit MiFIR transaction reports in relation to the aforesaid services if they trigger a MiFIR transaction obligation. Including the UPI for instruments of UK MiFIR Articles 26(2)(b) and 26(2)(b) The FCA is considering to mandate the inclusion of the UPI for securities captured by the UK MiFIR reporting obligation and may be issued with a UPI, refer to our blog post on the UPI for an overview. Alternatively the FCA is considering the implementation of a modified version of the UPI (UPI+). New Identifiers for Distributed Ledger Technology – DLT securities and for securities whose underlying assets are crypto-assets The FCA is proposing to adopt ISO 24165 Digital Token Identifier standard for DLT securities and underlying financial instruments to identify tokenised securities or similar. For a brief overview of the ISO refer to our earlier blog on ANNA-DSB’s adoption of DTIF codes for derivatives on crypto assets. If the FCA’s proposal is accepted firms that trade with DLT securities or securities whose underlying are crypto assets and under the assumption that the aforesaid securities are captured by the MiFIR reporting obligation, reporting firms will need to source the aforementioned ISO code. Reporting client/counterparty categories The FCA proposes the addition of a new field that will capture the category of the clients/counterparty. The said field will be allowed 2 values – Retail Client, Professional. For every trade where the firm submits a report it will need to assign a category to its counterparty in accordance with the aforementioned. Reducing reporting costs for small firms and request for feedback to remove duplication with other reporting regimes The FCA has asked for feedback on steps it could take to remove duplication with other reporting regimes e.g. a firm reporting a MiFIR captured derivative is always required to report it under EMIR as well. Moreover the FCA recognises that some small firms who are infrequently captured by the MiFIR reporting obligation are finding it difficult and costly to comply with the reporting regime. The FCA has requested feedback on how to alleviate the burden on small firms. Request for Feedback on messaging standards/new technologies The FCA is asking from respondents to provide feedback on whether new technologies or alternative messaging standards could improve transaction reporting. The FCA provided as an example of these alternative messaging standards the JSON format. The Consultation paper contains many more proposed amendments to MiFIR’s reporting requirements. The FCA is accepting feedback from market stakeholders till the 14th of February 2025. How can Complyport Tech Assist MiFIR Transaction Reporting is our service that allows clients to report their transactions in Financial Instruments as per the requirements of the Markets in Financial Instruments Regulation (MiFIR, Article 26) to the National Competent Authority (NCA), either directly or through an Approved Reporting Mechanism (ARM). Transaction data received on our Polaris Platform is processed, enhanced, validated and subsequently submitted in the format prescribed by each NCA. Contact our team of experts for more information or any assistance you may require.
ESMA Consultation Paper – Review of RTS 22 on transaction data reporting under Art. 26 and RTS 24 on order book data to be maintained under Art. 25 of MiFIR
As we have already noted in a previous blog post, with the departure of the UK from the EU, it was expected that at some point the transaction reporting regimes of both jurisdictions would begin to diverge. Now it appears that this process is picking up steam, as the FCA and ESMA are consulting for changes to their respective MiFIR transaction reporting regime. The FCA is also consulting on changes to its MiFIR reporting regime, see our blog post here. On the 3rd of October 2024 ESMA published a consultation paper proposing changes to the aforesaid transaction regime. MAP FinTech has already drafted its responses and intends to submit its views to ESMA’s consultation. See below a non-exhaustive list of changes that ESMA is proposing. Increase the total number of reportable data points by 48 new values and renaming existing data points ESMA is proposing to include additional fields that in some cases aim to better align MiFIR with other reporting regimes such as EMIR Refit. To this end, ESMA is proposing to include data points such as: Option Premium, Receiver of Leg1/2, Floating Rate, Spreads, Effective date, Reference period of the floating rate, Term of floating rate. These fields are fields EMIR reporting entities are familiar with, as ESMA is proposing to align (to the extent possible) MiFIR with EMIR reporting. MAP FinTech notes that not all 48 data points will be applicable to all trading scenarios. Further to the above ESMA is also proposing to change the definition and/or naming of some data points to align with the definitions/naming given under either SFTR or EMIR. Identifiers linking all transactions in off-exchange trading For any off-venue transaction ESMA is proposing the inclusion of a new field, the Transaction Identification Code (TIC). If ESMA’s proposals are accepted, all firms in a transmission chain will be required to report the same TIC code, liking all reports. For Example assume a chain where the Client submits an order to Broker1 then Broker1 further submits the order to Broker2 then Broker2 to Broker3 and so on. Each of the aforesaid Brokers if they have a MiFIR reporting obligation in the EU will be required to report the same TIC in their respective reports. ESMA proposes that the “Market Facing” firm should be the firm responsible for the TIC’s generation and dissemination further down in the transmission chain. Moreover ESMA is also proposing to standardise the TIC which will consist of elements such as Instrument Identifier, Date Time, LEI of generating entity. New Identifiers for Distributed Ledger Technology – DLT securities and for securities whose underlying assets are crypto-assets ESMA is proposing to adopt ISO 24165 Digital Token Identifier standard for DLT securities and underlying financial instruments to identify tokenised securities or similar. For a brief overview of the ISO refer to our earlier blog on ANNA-DSB’s adoption of DTIF codes for derivatives on crypto assets. Should ESMA’s proposal be accepted firms that trade with DLT securities or securities whose underlying are crypto assets and under the assumption that the aforesaid securities are captured by the MiFIR reporting obligation, reporting firms will need to source the aforementioned ISO code. Extending Art.4 of RTS 22 to include firms trading on Dealing on Own Account Under the current RTS 22 regime, firms trading under trading capacity DEAL cannot make use of the reporting exemption afforded under Article 4 of RTS 22. ESMA proposes extend the applicability of Art.4 to such firms. Reporting client/counterparty categories ESMA proposes the addition of a new field that will capture the category of the clients/counterparty. The said field will be allowed 4 values – Retail Client, Elective Professional Client, Professional Client and Eligible Counterparty. For every trade where the firm submits a report it will need to assign a category to its counterparty/client in accordance with the aforementioned. Proposal to switch from XML to JSON ESMA is requesting feedback on the issue of switching MiFIR reporting format from XML to JSON. As per the consultation paper ESMA is considering the gradual switch of various reporting regimes from an XML format to JSON. ESMA is asking respondents for their views on the proposed switch, including indications on costs, timelines of implementation and potential benefits. The Consultation paper contains many more proposed amendments to MiFIR’s reporting requirements. ESMA is accepting feedback from market stakeholders till the 17th of January 2025. Once the consultation phase ends, ESMA will proceed to analyse the responses and adjust the proposals accordingly, then it will submit the amended RTS for approval by the EU commission. How can MAP FinTech Assist MiFIR Transaction Reporting is our service that allows clients to report their transactions in Financial Instruments as per the requirements of the Markets in Financial Instruments Regulation (MiFIR, Article 26) to the National Competent Authority (NCA), either directly or through an Approved Reporting Mechanism (ARM). Transaction data received on our Polaris Platform is processed, enhanced, validated and subsequently submitted in the format prescribed by each NCA. Contact our team of experts for more information or any assistance you may require.
Insights from the Complyport Tech Webinar: Preparing for the UK EMIR REFIT Launch
As the UK prepares for the launch of the EMIR REFIT on September 30th, Complyport Tech hosted an informative webinar featuring key industry experts. The focus was on lessons learned from the EU EMIR REFIT rollout earlier this year and how these can be applied to ensure a smooth transition in the UK. The webinar was hosted by Luis Parra, Director at Complyport Tech UK, with presentations from James Hardie, Director of Regulatory Reporting Product at the London Stock Exchange Group (LSEG), and George Markides, Senior Manager Market Infrastructure Reporting at ComplyMAP Group. Luis Parra set the tone for the webinar by emphasising the importance of preparing for the UK EMIR REFIT, drawing on lessons from the EU experience. He highlighted that the FCA’s version of the regulation aligns closely with the EU’s, making the EU rollout a valuable reference for firms navigating the UK changes. James Hardie: Lessons from the EU Rollout James Hardie provided detailed insights into the EU EMIR REFIT experience, particularly focusing on Transaction Reporting Rejections. He noted that on day one of the EU rollout, 40% of trades were rejected, primarily due to schema and lifecycle issues. Within two weeks, this rate halved, and after one month, it fell to 9%, which was seen as acceptable by regulators. Testing and Preparation: Hardie stressed that the high initial rejection rates were largely due to insufficient User Acceptance Testing (UAT). He expressed concern that UK firms were following a similar pattern, with lower UAT engagement than expected. Rejection Reasons: He highlighted that the two main rejection reasons—schema errors and lifecycle issues—mirrored the EU experience. He emphasized the need for more comprehensive uplift testing, especially regarding XML schema and lifecycle transitions. Reconciliation Breaks: Hardie also discussed reconciliation breaks, where firms failed to match transaction data across different platforms. He observed that while these issues were also prevalent in the EU, the UK is showing similar trends, signalling that more effort is required to resolve these problems ahead of the go-live date. Hardie concluded by stressing that regulatory collaboration would be essential to reduce rejection rates and that pre-launch engagement with the FCA would be crucial. George Markides: Practical Considerations for UK Firms George Markides reinforced many of the points made by James Hardy but added further technical insight. His presentation focused on the complexities of schema validation and data dependencies that contributed to high rejection rates in the EU. Schema and Validation Rules: Markides pointed out that firms struggled with increased dependencies between fields in the new schema. These challenges were compounded by discrepancies between what ESMA’s documentation stated and what was required in practice, particularly regarding fields like the strike price. Unique Product Identifier (UPI) Issues: Markides delved into the confusion surrounding the use of UPIs, noting that firms often misapplied them in trade reports. He cautioned that this issue persists in both the EU and UK, with firms failing to accurately match UPIs to the correct instruments. Cross-Border Reporting Challenges: Markides emphasised that while the UK EMIR REFIT schema is similar to the EU’s, subtle differences could lead to rejection of reports. He warned that firms relying on EU experience without understanding the nuances of UK-specific requirements could face significant issues. Markides ended his presentation by urging firms to revisit the guidance provided by both the FCA and ESMA and to ensure that their systems are aligned with the latest schema updates to avoid validation issues. Trust Complyport Tech as your RegTech Provider To navigate the complexities of the UK EMIR REFIT, Complyport Tech offers the expertise, cutting-edge technology, and customized solutions needed for success. Our team provides expert guidance, helping you understand the regulatory implications while delivering advanced reporting solutions that ensure both accuracy and efficiency. With personalized support and ongoing assistance, we are equipped to help you adapt swiftly and confidently in this evolving regulatory environment. Moreover, our extensive experience with the EU EMIR REFIT gives us a unique advantage. We have gained a deep understanding of potential challenges and best practices, enabling us to anticipate issues and provide proactive solutions. By leveraging our insights from the EU framework, we can help ensure a smoother, more informed transition for UK firms, minimising disruptions and enhancing compliance processes. Contact our team of experts for more information or any assistance you may require.
UPI: A new data element for OTC derivatives reporting
One of the many changes that EU’s EMIR REFIT usher in is the UPI, or Unique Product Identifier. The UPI will be deployed across many jurisdictions including, but not limited to, Australia, Singapore, Europe (the EU and the UK) as well as the USA. The road towards a globally endorsed UPI The UPI was introduced under EMIR version 1, but at the time Securities Commissions/Central Banks and other interested parties had yet to agree on a global standard. In fact, in the current EMIR RTS under Product classification, pundits will notice that the UPI exists as an option but as per the specs “For products for which ISIN or AII are not available, endorsed Unique Product Identifier (UPI) shall be specified. Until UPI is endorsed those products shall be classified with CFI code.” At an international level, the International Organisation of Securities Commissions (IOSCO) and the Committee on Payments and Market Infrastructures (CPMI) set to work on the UPI and in 2017, they published the Technical Guidance (to authorities) on the Harmonisation of the Unique Product Identifier. The Financial Stability Board (FSB) following the issuance of the aforesaid guidance assigned the Derivatives Services Bureau (DSB), a subsidiary of the Association of National Numbering Agencies (ANNA), as the sole issuer of the UPI codes, while the Regulatory Oversight Committee (ROC) was appointed as the International Governance Body for the UPI Standard. See below a brief video prepared by ANNA DSB on the UPI When do you need a UPI in the EU? With the advent of EMIR REFIT and given that the preparatory work was finalised for the adoption of a global UPI standard, UPIs will be required for instruments which do not have an ISIN and are not listed on an EU Trading Venue (meaning a Regulated Market, Multilateral Trading Facility, or Organised Trading Facility) or, not executed with a Systematic Internaliser (SI) or, not listed on third country organised trading platforms. The new rules are very specific that instruments should be identified either with an ISIN or with a UPI (there will not be a situation where both identifiers will be required). However, as mentioned in ESMA’s validation rules, ISINs are required where the Venue of Execution data field is populated with a MIC code of EU Trading Venues, or SIs, or with the value XOFF. XOFF signals that the instrument in question is listed on a Trading Venue but the transaction did not take place on said venue, or with an SI or, on organised trading platforms outside the EU. We should note here, that all instruments listed on EU (and UK) trading venues are required to be identified with an ISIN since 2018, with the advent of MiFID II/ MiFIR package and more specifically, mandated under Regulation EU 2017/585 supplementing MiFIR. Moreover, for instruments listed on third country venues exclusively (which should be identified in the EMIR REFIT report with their MIC code, where the said execution took place on the third country venue) and where those third country venues do not identify their instruments with an ISIN, both the ISIN and UPI field can be left blank (UPI in this case is marked as optional). Invariably, from the above it is evident that the following classes of non-listed derivatives are likely to be captured by the UPI requirement, the below list is not exhaustive: Forward contracts (e.g. NDFs on various assets traded between FCs and/or NFCs, Virtual Power Purchase Agreements between Wholesale Energy Producers – Consumers); Options (e.g. Stock option programmes some firms offer as part of employee remuneration packages, digital or binary options); Contracts for Difference; Swaps (e.g. Total Return Swaps, Fixed-For Floating Swaps, Currency Swaps); Etc. In our next blog post on the UPI, we will deep dive into the technical documentations of the UPI code, in order to assist the market participants understand how to generate or retrieve the UPI as necessary. How is MAP FinTech going to assist? MAP Fintech offers the UPI Link Service that helps retrieving companies match their products’ attributes precisely to those already issued UPIs, ensuring that reporting companies use the correct UPI Code. MAP FinTech’s UPI Link Service boasts essential functionalities, including: Automated identification of UPIs using reference data provided by the reporting entity and the latest issued UPIs supplied by the ANNA-DSB. UPI enrichment of reported files prior to submission to the TR. Error identification where UPIs cannot be mapped against the ANNA-DSB’s issued UPI records. Inline editing capability for on-the-fly amendments on the UPI. Advanced search function from within Polaris portal which can pinpoint the exact UPI based on enhanced search criteria.
Additional Instruments Captured by updated EU MiFIR – an overview
Instruments captured by EU MiFIR reporting, divergence from UK MiFIR requirements With the departure of the UK from the EU it was expected that at some point, the EU and the UK regulatory regimes will start diverging. With Regulation 2024/791 amending MiFIR, the EU has introduced new asset classes which are now captured by the MiFIR reporting obligation. The amended rules came into effect on the 28th of March 2024. The new instruments captured under EU-MiFIR are not, currently, subject to the UK’s MiFIR reporting obligation. As per the amended MiFIR, the obligation to report transactions (Article 26.2) has been amended and applies as follows: financial instruments which are admitted to trading or traded on a trading venue or for which a request for admission to trading has been made, irrespective of whether such transactions are carried out on the trading venue, with the exception of transactions in OTC derivatives other than those referred in Article 8a(2), to which the obligation shall apply only when carried out on a trading venue; financial instruments where the underlying is a financial instrument that is traded on a trading venue, irrespective of whether such transactions are carried out on the trading venue; financial instruments where the underlying is an index or a basket composed of financial instruments that are traded on a trading venue, irrespective of whether such transactions are carried out on the trading venue; OTC derivatives as referred to in Article 8a(2), irrespective of whether such transactions are carried out on the trading venue. While points (a) through to (c) introduce nothing new, the inclusion of (d) adds 2 additional types of OTC derivatives. Types of instruments captured by the new MiFIR reporting obligation As per Article 8a(2) of EU MiFIR the following types of instruments denominated in EUR, JPY, USD or GBP are now captured by the MiFIR reporting obligation. Type 1: OTC derivatives declared by the EU as subject to the clearing obligation under EMIR, and where those derivatives are interest rate derivatives have specific tenors (years till maturity); Type 2: OTC derivatives – Credit Default Swaps that reference a Global Systematically Important Bank (G-SIB) and that are centrally cleared or, that reference an index comprising G-SIBs and that are centrally cleared. For illustration purposes, please see below select Asset Class and Instruments captured (indicative and non-exhaustive). Asset Class Instrument Type Underlying Reference Product ID / Comments Type 1 Interest Rates Swap EURIBOR Basis Swaps Interest Rates Swap EURIBOR Fixed-to-float Swaps Interest Rates Forward EURIBOR Forward Rate Agreements Interest Rates Swap €STR Overnight Index Swaps Interest Rates Swap TONA Overnight Index Swaps Interest Rates Swap FedFunds Overnight Index Swaps Interest Rates Swap SOFR Overnight Index Swaps Interest Rates Swap SONIA Overnight Index Swaps Credit Credit Default Swap (CDS) iTraxx Europe Main CDS Untranched Index Credit Credit Default Swap (CDS) iTraxx Europe Crossover CDS Untranched Index Type 2 Credit Credit Default Swap (CDS) G-SIBs CDS on Single Name Credit Credit Default Swap (CDS) Index comprised of G-SIBs CDS on Index For the list of G-SIBs, refer to the Financial Stability Board (FSB) as of November 2023. For the instruments subject to clearing, under EU EMIR, refer to ESMA’s registry section 1.1. *Disclaimer the above is for information purposes only. For an up-to-date list of instruments captured consult with the applicable regulation, lists of instruments subject to clearing, FSB announcements and your compliance risk management teams. How is Complyport Tech going to assist Our MiFIR Transaction Reporting service allows clients to seamlessly report their transactions in Financial Instruments as required by the Markets in Financial Instruments Regulation (MiFIR, Article 26). Clients can report to National Competent Authorities either directly or through an Approved Reporting Mechanism using our award-winning Polaris Platform. Transaction data is seamlessly processed, validated, and submitted in the required format through our fully automated service. Solution includes consolidated data feeds, automatic checks, a robust reconciliation engine and continuous regulatory updates. Clients enjoy optimised technology, cost savings, expert training, and transparent monitoring of their reporting via the Polaris dashboard. For more information or to schedule a demo, please contact our team of experts.
Unique Product Identifier: Crypto-asset identifiers
Unique Product Identifier: Crypto-asset identifiers As we had discussed in previous blog entries regarding the UPI and the technical data on how to generate the UPI, we now turn our focus on a specific aspect of the UPI. UPI for derivatives on crypto-assets. As mentioned in our January blog entry, ANNA-DSB has adopted various standards widely accepted by industry stakeholders. E.g. ANNA DSB adopted the following standards: for currencies the three letter ISO 4217 code; for Securities their ISIN, or SEDOL, or CUSIP, or FIGI; for Equity Indices, their ISIN or official name as published by the index administrator; etc. Crypto assets represent a particular problem, due to their nature they are not standardised nor are they issued with any unique identifier. As such, crypto-asset jargon widely used to identify such assets is not standardised nor unique, e.g. bitcoin is sometimes referred to BTC or XBT, while Ethereum Ether, is sometimes referred to as Ether, ETH or with Greek letter Xi Ξ. In order to avoid duplication pitfalls, for crypto-asset identifiers, ANNA-DSB has decided to adopt the identifiers issued by the Digital Token Identifier Foundation – DTIF. The code is a unique 9 letter code that characterizes each crypto asset maintained and issued by the aforesaid foundation. See below a non-exhaustive list of crypto-assets with their corresponding DTIF code. Token name Short name DTIF Code Additional Comments Bitcoin BTC, XBT 4H95J0R2X Bitcoin Cash BCH, BCC, XBC J9K583ZGG Ethereum Ether ETH, Ξ X9J9K872S Litecoin LTC WTX0G7K46 Ripple XRP XRP L6GTZC9G4 Tether USD USDt 29DD3R2SH NEAR Tether USD USDT 75T0GP5WJ USDT/BTC, XBT Tether USD USDT 2QWSBDMNC USDT/ETH, Ξ USDT USDT 6QBMW6DQZ USDT/SOL Solana SOL SOL 20J63Z4N3 Binance Beacon Chain BNB 85MP572L7 Binance Coin Binance USD BUSD DDWNJQZZH BUSD/BNB Shiba Inu SHIB VB2Q3G56B SHIB/ETH, Ξ Dogecoin DOGE 820B7G1NL TRON TRX TRX 993D8X1FB As such entities that want to generate or retrieve UPIs on crypto-assets derivatives, they should, be aware of the appropriate identifier of the underlying reference value (the crypto asset) in this case the crypto-asset DTIF code. For a comprehensive list of the DTIF codes that ANNA DSB has included in its libraries refer to the link here. See also a short list of issued UPIs on the basis of the above. Contract Type Underlying Crypto asset name DTIF code/Underlier ID /Commodity Reference Price UPI Forward Bitcoin 4H95J0R2X QZ8VLPDHMFT5 Contract for Difference Bitcoin 4H95J0R2X QZ52MJGFVNBM Contract for Difference Solana SOL 20J63Z4N3 QZC6G1M4D7F1 Forward Ethereum Ether X9J9K872S QZ23M8PD81D9 Forward Dogecoin 820B7G1NL QZT4X5KM56G5 *Disclaimer, the DTIF codes and the Unique Product Identifiers in this blog are presented for information purposes only, for an up-to-date list of DTIF codes and/or UPIs consult Digital Token Identifier Foundation and/or ANNA – DSB resources. How is Compltyport Tech going to assist? MAP Fintech offers the UPI Link Service that helps retrieving companies match their products’ attributes precisely to those already issued UPIs, ensuring that reporting companies use the correct UPI Code. MAP FinTech’s UPI Link Service boasts essential functionalities, including: Automated identification of UPIs using reference data provided by the reporting entity and the latest issued UPIs supplied by the ANNA-DSB. UPI enrichment of reported files prior to submission to the TR. Error identification where UPIs cannot be mapped against the ANNA-DSB’s issued UPI records. Inline editing capability for on-the-fly amendments on the UPI. Advanced search function from within Polaris portal which can pinpoint the exact UPI based on enhanced search criteria.
Complyport Tech Webinar – In anticipation of the EU EMIR REFIT launch
Complyport Tech hosted a webinar with its EMIR-obliged clientele a few days before the REFIT go-live date to better prepare reporting entities. MAP FinTech staff reiterated to reporting entities that, when reporting on a delegation basis on behalf of other financial institutions (such as investment firms, credit institutions, funds etc.) defined under EMIR as Financial Counterparties (FCs), they need to furnish their Trade Repositories (TRs) with the LEI and a contact email for the said FCs. Trade Repositories need to obtain explicit authorisation by delegating parties As per the requirements of EMIR REFIT, TRs will need to directly contact delegating parties asking them to confirm in writing that they have authorised the reporting entities to submit EMIR reports on their behalf. Failure by the delegating parties to provide explicit confirmation will result in the rejection of reports submitted by report-submitting entities on their behalf. TRs have begun reaching out to delegating parties from early April 2024 and urged reporting entities to inform all those concerned to take prompt actions. Finally, for non-financial counterparties for whom the reporting entities are liable to submit EMIR reports on their behalf, the reporting entities can self-certify that they have received the authorisation to report without the need for the TR to directly obtain the explicit confirmation. UPI population status update On the issue of generating UPIs, MAP FinTech informed reporting entities that as per ANNA-DSB, the authority issuing UPIs, as of early March 2024 about 1,148,000 UPI records were generated. However, from an analysis conducted by ANNA-DSB, only 300,000 were generated by Market Participants; the rest were populated by ANNA-DSB themselves from the record they have of OTC unlisted derivatives that were issued with an ISIN. It was emphasised to webinar attendees that a UPI must be available on the reporting day. Therefore, attendees must examine their OTC derivatives’ offerings and try to identify the suitable UTI from ANNA-DSB’s database. In cases where the necessary UPI does not exist, reporting entities need to generate it. You can refer to MAP FinTech’s blog on the technical aspects regarding the generation of a UPI. Testing of the new regime MAP FinTech readiness and troubleshooting MAP FinTech informed the audience that it has carried out extensive testing of the new reporting regime and has identified discrepancies and inconsistencies in the XML schema and ESMA’s validation rules that caused reporting breaks. These were addressed to the TRs and ESMA who have provided intermediate guidance on how to overcome these issues. Furthermore, MAP FinTech informed clients that, as of the beginning of April the overwhelming majority of its clientele had already provided the necessary additional data for the REFIT reporting regime and those were successfully incorporated into the new reports and were tested in a UAT TR environment. New tools for EMIR-REFIT In closing, participants were reminded that MAP FinTech offers new tools to assist its clientele, namely the UPI Link search tool that identifies issued UPIs from ANNA-DSB’s database, and XMLCon.Vert service that allows clients to convert .csv files to the requisite REFIT XML format. MAP FinTech: your trusted RegTech Provider Looking ahead, MAP FinTech pledges continuous monitoring and support post-launch, anticipating an adjustment period and committing to random reconciliation checks to uphold data integrity. Clients are urged to vigilantly monitor submissions and report any anomalies during the initial weeks. As the countdown to this pivotal milestone accelerates, the synergy between MAP FinTech, clients, and TRs assumes paramount importance. With unwavering dedication to facilitating a seamless transition, MAP FinTech expresses gratitude for the collective effort of all stakeholders, confident that this complex undertaking will ultimately yield more efficient reporting processes under the new EMIR REFIT standards. At MAP FinTech, we offer more than just cutting-edge technology; We provide expert knowledge and unwavering support to guarantee a seamless transition to the new reporting requirements. Contact our team of experts today and experience a smooth transition.
What are the key regulatory developments to keep an eye on in H1?
An insightful article in FinTech Global highlights several key regulatory developments to watch in the financial landscape during the first half of 2024. Key areas of focus include communication compliance, with continued scrutiny of recordkeeping accuracy and the monitoring of communication channels. Additionally, the rise of Generative AI (GenAI) brings both promise and regulatory attention, as authorities seek to address compliance implications associated with AI technologies. Further regulatory efforts are anticipated in areas such as cryptocurrency regulation, with a focus on stablecoins and cross-border compliance. Additionally, as noted by Christodoulos Mouskos, Head of Operations at Complyport Tech, the changes under EMIR REFIT will introduce new derivatives reporting requirements, presenting initial challenges for reporting parties as they adapt to the new rules and collaborate with regulatory bodies to address inconsistencies. Overall, the regulatory landscape is poised for continued evolution, with an emphasis on harmonisation across jurisdictions and alignment with emerging technologies. Firms are advised to stay proactive in implementing compliance measures to navigate these regulatory shifts effectively. Read the full article here. Contact our team of experts and learn how you can benefit from our innovative and comprehensive regulatory reporting solutions.
Is the DIY of EMIR REFIT a Costly Detour?
The world of financial regulations is constantly evolving, and it is crucial for businesses to stay compliant with these rapidly changing rules. One such regulation is the European Market Infrastructure Regulation (EMIR) and its many reporting requirements. Understanding EMIR REFIT Reporting The upcoming changes to EMIR reporting were drafted to harmonise the reporting regimes with the work being carried out at an international level by IOSCO-CPMI on critical derivatives’ elements. There are several changes that the new regime ushers in, including more granular data submitted, new fields, changes to fields that are carried over from the current EMIR reporting regime, new outgoing messages from TRs to reporting entities as well as regulators such as abnormal values, outdated valuations and so on, and the introduction of the UPI, among others. Crucially, the new regime increases the number of data points and values that are subject to reconciliations, which have now expanded to include, for example, valuations. While all the lessons learned with the original iteration of EMIR will not be altogether scrapped, the new reporting regime introduces its own complexities. Hence, reporting counterparties need to be prepared to hit the ground running from the reporting start date as there is no grace period involved. This creates an acute need for reporting entities to enhance their Information Technology, Risk and Compliance capabilities in order to fully digest the substantial body of standards, guidance, and rules issued by the regulators for EMIR REFIT. Can EMIR REFIT Reporting Be Done In-house? Many reporting entities consider implementing EMIR REFIT reporting in-house for reasons such as greater control over sensitive financial data, flexibility, immediate cost savings, and resource reusability. However, it’s crucial for any organization considering an in-house solution to evaluate the real costs and missed opportunities associated with this choice. Financial Cost Parameters of DIY EMIR REFIT Reporting The financial cost associated with self-implementing EMIR REFIT reporting encompasses a spectrum of elements, including human resources expenses, reporting fees, technology-related costs, and the effort required, among others. Human Resources cost: The diverse roles required for in-house EMIR REFIT reporting lead to substantial personnel- related costs, including salaries, training, recruitment, and administrative expenses. The types of professionals required to run this kind of solution internally may include: Regulatory Analysts IT Business Analysts Software Developers Infrastructure Architects Quality Assurance Experts UI/UX Experts Project Managers Talent acquisition and retention challenges have become more prominent than ever, making assembling an in-house team a complex and costly endeavor. Partnering with specialised service providers can alleviate these issues and ensure efficient and compliant reporting. Reporting fees: Choosing to contract directly with a Trade Repository (TR) for EMIR REFIT reporting rather than using a third-party aggregator can result in higher reporting costs. This cost disparity is primarily attributed to the fee bands associated with trade reporting. When a third-party aggregator is involved, it can accumulate a larger volume of trade data, reaching higher fee bands more quickly. This increased volume allows the aggregator to benefit from economies of scale, resulting in a more favorable price per trade, with the potential to pass on this financial benefit to the reporting entities. Consequently, companies contracting directly with TRs may find themselves paying comparatively higher fees due to the aggregation advantage held by aggregators and service providers in the reporting process, including when it relates to EMIR REFIT. Technology cost: Choosing to tackle EMIR REFIT reporting entails bearing the full brunt of technology costs, which may encompass expenses related to software licenses, hardware and infrastructure, as well as security measures. In contrast, opting for a specialized service provider often provides a more cost-effective option. They can leverage their existing infrastructure, software resources, and security protocols, ultimately reducing the company’s financial burden. One example when it comes to EMIR REFIT is the expertise and effort needed to migrate from the current CSV files that are currently used to the newly introduced XML template following the ISO 20022 methodology. Once again, the economies of scale achieved through service providers can significantly lower technology expenditures when compared to attempting to manage these complexities independently. Effort required: Undertaking EMIR REFIT reporting internally necessitates a significant investment of time across multiple phases. During the Preparation phase, a considerable number of hours is needed to conduct a thorough gap analysis to identify the required changes. Subsequently, moving into the Design and Implementation phase, there’s a substantial time commitment linked to tasks such as integrating new fields, adhering to recently introduced ISO standards, mapping Unique Product Identifiers (UPIs), converting files from CSV to XML formats, integrating additional action types within trading systems, and handling various related activities. Following this, the Quality Assurance phase demands a considerable amount of time to ensure that the changes meet the criteria of completeness, accuracy, and adherence to specified timelines. As the reporting deadline approaches, meticulous planning and execution become imperative during the Migration and Go-Live phases to prevent last minute issues and ensure a seamless transition to the new reporting requirements, such as, for example, the updating of outstanding trades. Last but not least, a commonly underestimated phase is the one of Post-implementation, which necessitates plenty of time to establish and maintain the required monitoring mechanisms and procedures. Overall, the entire in-house EMIR REFIT reporting process is a time-intensive endeavor that typically spans from eight to twelve months for completion. Other financial costs: Costs related to the continuous monitoring of the regulatory landscape and other opportunity costs are incurred when opting for in-house reporting. Maintenance costs escalate due to the need for continuous monitoring of the complex and ever-changing regulatory landscape, requiring substantial hours for compliance updates. For example, in EMIR REFIT, the reconciliation process will be conducted in two phases: 87 fields in the go-live phase, and 61 fields two (2) years after. Furthermore, there’s an opportunity cost involved as valuable hours and resources are redirected from revenue-generating endeavors. As per Deloitte’s recent global outsourcing survey, “Enabling focus on core functions” is the most common perceived benefit among companies that use outsourcing. Other
Unique Product Identifier: Modalities and Technicalities
In our previous blog post we briefly mentioned when a UPI will be necessary to comply with the EU EMIR-REFIT. Here we will show you how to generate or retrieve a UPI from the ANNA-DSB. This article goes beyond EU EMIR – REFIT as the same modalities presented below can be applied to all jurisdictions that have endorsed the UPI, including, but not limited to, the USA, the UK, Australia, the EU, Singapore, etc. UPI inputs In order to achieve harmonisation across jurisdictions and streamline inputs, the UPI standard has adopted variable standards widely used in the financial industry. A few of these inputs include: ISDA’s taxonomy ver.2 for the categorisation of products; CFI codes ISO standard 10962 ver.2015 for the classification of products; ESMA’s Transparency Calculations (TTC) for equity indices; ISDA’s FpML for commodity definitions and interest rates; Etc. To correctly generate or retrieve the UPI code, market participants need to familiarise themselves with these inputs to avoid generating or retrieving incorrect UPI code ANNA-DSB has produced a library of product definitions for the UPI where market participants will find all necessary information contained therein. UPI generation/retrieval In order to be allowed to generate UPIs, the ANNA DSB requires interested parties to sign up to its service and pay a fee correlated to the amount of UPIs said parties need to generate on a yearly basis. In the case where the interested party is only looking to retrieve already issued UPIs, the ANNA DSB service offers a free registration option that has some limitations. The UPI, as we shall see, is issuer agnostic. That means that the UPI is not attached to the entity that generated it. Hence, where an entity has generated a UPI with specific attributes, for example, a Non-Deliverable Forward on EURUSD where the settlement currency is the EUR, another entity offering the same deliverable forward with the same attributes can retrieve the UPI previously issued for its reporting needs. The UPI request template describing the various attributes that the interested party needs to provide to issue the correct UPI can be found in the product libraries linked above. In our example, we will show you what values need to be inserted for a NDF on the EURUSD and settled in EUR. The ANNA-DSB systems will request the following items in order to generate the UPI. Therefore the system will require to identify the following parameters, in parenthesis the source for each input. Asset Class = Foreign_Exchange (ISDA Taxonomy); Instrument type = Forward (ISDA Taxonomy); Product = NDF (ISDA Taxonomy); Level = UPI (ANNA DSB); Underlier ID = EUR (ISO 4217 – currency 3 letter code); Underlier Source = CCY (ANNA-DSB); Other Underlier ID = USD (ISO 4217 – currency 3 letter code); Other Underlier ID Source = CCY (ANNA DSB); Settlement Currency = EUR (ISO 4217 – currency 3 letter code). The system will generate the UPI. The UPI will contain the inputs the generating entity inserted but will also contain derived values generated from ANNA DSB such as the instrument’s name, the CFI, and other characteristics. As we can see from the output, the instrument is issuer agnostic, i.e. there is nothing in the UPI that ties this specific UPI with the entity that issued it. Where another entity trades with NDFs on EURUSD settled in EUR, they can use this previously issued UPI for their reporting needs. Moreover, the above record will be publicly available to all registered users to the UPI service, including, but not limited to, regulators who can cross check the reported values (e.g. CFI, instrument name, settlement currency, etc.) with the UPI contained values used to verify a correct submission. Attention From the above example we would like to draw the attention of UPI generating or retrieving entities to the following: Ensure familiarity with the mentioned inputs When using an already issued UPI, ensure that the product you intend to trade matches 100% all the UPI attributes relevant to the product. Familiarise yourself with ANNA-DSB’s production and testing environment for UPIs. How is Complyport Tech going to assist? Complyport tech offers the UPI Link Service that helps retrieving companies match their products’ attributes precisely to those already issued UPIs, ensuring that reporting companies use the correct UPI Code. Complyport Tech’s UPI Link Service boasts essential functionalities, including: Automated identification of UPIs using reference data provided by the reporting entity and the latest issued UPIs supplied by the ANNA-DSB. UPI enrichment of reported files prior to submission to the TR. Error identification where UPIs cannot be mapped against the ANNA-DSB’s issued UPI records. Inline editing capability for on-the-fly amendments on the UPI. Advanced search function from within Polaris portal which can pinpoint the exact UPI based on enhanced search criteria.