How will the new EMIR REFIT reporting requirements impact the EU and the UK markets?
In a recent article published by FinTech Global, George Markides, Senior Manager of the Compliance Support Department at Complyport Tech, highlights key aspects of the new EMIR REFIT reporting regime and how it will impact the EU and UK markets. The rules come into effect on April 29, 2024, in Europe and September 30, 2024, in the UK. According to Markides, the regime introduces several novelties that will impact the way reporting counterparties operate and exchange information with each other, inviting increased scrutiny from regulators. Notably, Markides writes that one of the most significant changes is the additional data points and values reported that will be subject to reconciliation for dual-sided reports submitted by counterparties in the EEA or UK. The reconciliation takes place at the trade repository (TR) level with results shared with reporting entities and regulators. Crucially, valuations of derivative contracts under EMIR will also be subject to reconciliation. Markides emphasises the establishment of the Unique Product Identifier (UPI), a concept introduced in EMIR V1 but now required from day one of the new reporting regime. UPI serves as an identifier for non-listed OTC derivatives and is issued by ANNA Derivatives Services Bureau (ANNA-DSB), though new issuances will incur fees. Additionally, EMIR REFIT introduces more detailed outgoing messages from TRs, sharing data such as number of submissions, number of rejections, outstanding positions, and trades with outdated or no valuations or collateral information, reconciliation status, or abnormal values reported. These reports aid reporting entities in correcting their submissions and provide regulators with a more immediate and comprehensive view of compliance with the reporting regime. In conclusion, Markides stresses that these changes necessitate reporting counterparties to enhance oversight and monitoring to minimise potential lapses in compliance. Read the full article here. MAP FinTech can fully assist any firm under EMIR Reporting to seamlessly adapt to the evolving reporting requirements brought on by EMIR REFIT. Contact our team of experts and learn how you can benefit from our innovative and comprehensive regulatory reporting solutions.
EU/UK EMIR REFIT: A Significant Increase to the Number of Reportable Fields
Partner Up with Complyport Tech to Overcome Your Challenges With deadlines approaching for implementing the new EMIR reporting standards in the EU (April 29, 2024) and the UK (September 30, 2024), it is crucial to fully understand these new requirements and what they entail. Based on these new standards, there has been a significant expansion in the number of relevant fields with them increasing from 129 to 203 in the EU and 204 in the UK. Considering the removal of 13 fields, this means the introduction of 87 new fields in the EU and 88 in the UK. Moreover, approximately 100 fields have undergone modifications in terms of their name, description, acceptable values, or a combination of these factors. Overall, this increase in the number of fields poses a significant challenge and could potentially burden reporting entities. For instance, they now face the task of locating new fields, sourcing the necessary information, and incorporating them into their regular reporting cycle. Among the new field additions, one that should have a substantial impact is the introduction of the “Event Type” field. While the “Action Type” field addresses the “What” aspect of a transaction, the “Event Type” field delves into the “Why” aspect, offering greater granularity to the event’s lifecycle. When combined, these two fields, “Action Type” and “Event Type,” results in 56 distinct and permissible combinations of values, which in turn significantly alters the lifecycle event management and necessitates specific actions within the entity’s reporting system. These actions are necessary in order to capture these events accurately and seamlessly and incorporate the changes into the reporting workflow, enabling their automatic reporting when the relevant conditions are met. An indicative short list of EMIR REFIT’s newly introduced field-related changes can be found below: Unique Product Identifier (UPI) obligations Crypto-asset-related derivative flag Post Trade Risk Reduction (PTRR) related fields New Action Type values Event Type field Delta The new fields mandated under the updated ITS/RTS, both individually and collectively, pose a distinctive challenge for firms. As previously mentioned, this challenge is multifaceted, starting with identifying and localizing these fields, extending to their acquisition, and ultimately incorporating them seamlessly into the reporting cycle. Furthermore, the increase in the number of EMIR REFIT fields compounds the complexity of an already complicated task, one that includes coordination between reporting counterparties to ensure the accurate completion of these fields to prevent unnecessary pairing and matching issues. In addition, if not handled correctly, this increase may result in an elevated risk of receiving more rejections from Trade Repositories (TRs) and failures to match, given that with the new RTS/ITS additional fields will be reconciled by TRs. Moreover, firms will now have to deal with larger incoming and outgoing files (the more fields, the bigger and more complex the file becomes), introducing additional overheads in terms of processing resources, storage requirements, and the level of complexity when working with these files. At Complyport Tech, we are well-equipped to help you with these challenges. Firstly, we can provide valuable guidance in understanding which reportable fields are relevant to your specific trading model and activity. Furthermore, we offer flexibility in terms of how this information is retrieved or received from the reporting entity, ensuring the seamless integration of data. Our approach to the increase in the number of fields involves requesting only the necessary information from the reporting entity, while employing conditional rules and enhancement criteria to complete the remaining required fields. This facilitates the reporting process and reduces the burden on the reporting entity. Furthermore, our Polaris web portal (the interface of our Polaris reporting platform) offers an efficient solution for managing fields that do not change very often (the so-called static information). This user-friendly portal simplifies the task for reporting entities, making field management as straightforward as possible. Also, our reporting algorithms are designed to automatically identify relevant actions taking place in the client’s trading system or data and map them to the appropriate action and event types in reporting, thus providing substantial assistance to the reporting entity to overcome this challenge. Lastly, thanks to the numerous validations incorporated into our Polaris reporting platform, potential rejections are caught at an early stage within the reporting system before they reach the TRs and the National Competent Authorities (NCAs). This proactive approach ensures that, despite the increase in the number of fields, reporting firms will maintain a healthy reporting framework and remain compliant at all times. Partner Up with Complyport Tech to Overcome Your Challenges Complyport Tech is a leading and award-winning global regulatory technology provider, highly regarded for its proprietary reporting technology and exceptional client-centric after-sales support. As one of the first providers in Europe to report under the European Market Infrastructure Regulation (EMIR), with billions of transactions reported successfully so far, we have built a reputation for excellenhttps://mapfintech.com/solutions/ce, coupled with the necessary regulatory expertise and technological innovation to help navigate their respective regulatory obligations. Contact our team of experts to learn how you can benefit from our innovative and comprehensive regulatory reporting solutions and achieve a smooth transition to the changes in reporting requirements brought by EMIR REFIT.
Navigating the Challenges and Risks of Complying with CRS and FATCA Reporting Obligations
The objective of the Foreign Account Tax Compliance Act (FATCA) is to enhance tax compliance among US citizens through a comprehensive set of regulations. This legislation mandates foreign financial institutions to determine if their clients are “US persons” and provide the US Internal Revenue Service (IRS) with information on their financial accounts. Non-compliance with these regulations may lead to substantial penalties. The Common Reporting Standard (CRS), akin to FATCA, also aims to counter offshore tax evasion and upkeep the transparency of the global tax system. Financial institutions operating in participating jurisdictions are obligated to identify the tax residencies of their clients and disclose financial accounts held by foreign tax residents to the local tax authorities. These authorities then exchange this information with the relevant jurisdictions’ tax authorities. The time for yearly FATCA and CRS reporting is either near or already underway in some jurisdictions. Here are the deadlines for several of these. Challenges One of the major challenges faced by firms is the analysis and interpretation of the requirements, which consist of over 300 pages of guidelines to read. Additionally, completing more than 65 fields per record and dealing with complicated multilevel XML files can also pose a significant barrier. Moreover, managing different jurisdictions, each with its own unique set of intricacies, can be quite complex. Risks In terms of risks, incorrect completion of CRS and FATCA reporting, as well as failing to meet the reporting deadline and its many requirements, can result in penalties, reputational damage, and legal consequences. Investing a costly number of resources to file the relevant submissions, which may burden your budget and disrupt your daily operations, is another risk. Lastly, making incorrect or false submissions can result in withholding penalties for specific payments. How can Complyport Tech assist you? Given the complexity of FATCA and CRS reporting, the challenges in keeping up with the regulatory updates, and the penalties in case of non-compliance, it is reasonable to get ready early. Complyport Tech can fully support your business’ regulatory reporting needs. We receive reportable information, construct the CRS and FATCA annual reports, and, for most countries, submit them to the relevant competent authority as prescribed by the relevant provisions of both CRS and FATCA. Complyport Tech’s CRS and FATCA Reporting Services provide a user-friendly approach to receiving, validating, transforming and submitting the relevant information required under CRS/FATCA reporting and due diligence rules. These services are delivered via our powerful and award-winning Polaris platform, together with the rest of its reporting offerings and our team of experts’ impeccable support services. Complyport Tech’s CRS/FATCA – Key Features Cost-efficient integrated reporting solutions provided under a single platform. Highly automated and scalable solution that can report for as many accounts as you have. Flexible in the way it receives data, either via standard templates or raw data. Multiple reporting health checks for both content and schema and automatic filtering of erroneous entries. Automatic conversion of data to XML and separation of files based on tax residency. Submissions to various tax authorities worldwide. On-going communication with regulators to ensure the system reports reflect regulatory updates and changes.
EMIR reporting 101 – Collateral Updates
Did you know that Investment Firms, Banks, and Funds must report collateral received from clients including retail clients, or posted to other counterparties? Under EMIR’s risk mitigation techniques, Counterparties that do not clear their derivatives trades with a Clearing House, are required to exchange collateral to manage default/counterparty risk. This exchange of collateral must be reflected in the EMIR reporting that Counterparties submit to the TRs. Collateral is split under EMIR in three broad categories: Initial margin (received from clients/other counterparties or posted to other counterparties) Variation margin (received from clients/other counterparties or posted to other counterparties) Excess collateral Whereby Initial margin is the collateral collected to cover current and potential future exposure in the interval between the last collection of margin and the liquidation of positions or hedging of market risk following a default of the other counterparty Variation margin is the collateral collected to reflect the results of the daily valuations of outstanding contracts (either marked to market or marked to model) Excess collateral is additional collateral posted or received separately and independently from initial and variation margins At Complyport Τech we can help create and submit on-time accurate collateral reports reflecting your trading data, with our dedicated support and compliance teams we can help counterparties navigate successfully and with ease the requirements under EMIR. Say goodbye to the hassle and hello to peace of mind with Complyport Tech. Contact us today to learn more!
UK EMIR Derivatives Reporting Framework: FCA update
On 24th February 2023, the FCA issued an update regarding changes to the UK EMIR derivatives reporting framework. The joint FCA/Bank of England Policy Statement (PS 23/2) announced that the new rules will come into force from 30 September 2024, as well as publishing draft versions of EMIR Validation Rules and Incoming/Outgoing XML schema. Firms can submit feedback for technical specification documents until the 24th of March 2024, with the final versions expected to be released shortly after this date. Although the UK rewrite remains largely in line with ESMA, there are some differences to be aware of: Dual Reporting Obligations Dates: With the ESMA deadline date on 29th April 2024, separate to the FCA 30 September 2024 date, firms with dual reporting obligations will need to provide two versions of EMIR reporting. Delegated Reporting: Regarding cross-jurisdiction reporting, EU entities currently providing delegated reporting to customers in the UK will continue to provide this in the existing format for clients but will need to use the updated Refit version internally. There is also additional pressure on UK firms providing delegation to EU firms, as they will need to be compliant by the earlier ESMA date of 29th April 2024 rather than the September deadline. Field and Validation Discrepancies: ‘Execution Agent’ is an additional field allowing third parties to be tagged by firms on their behalf. Various validations have been amended in the XML Schema Definitions (XSD) as well as a number of additional slight changes by the FCA. As the EU and UK frameworks continue to be updated in the future, it may become more difficult for firms to manage these discrepancies and requirements. Get in touch today to find out how we can assist your firm with the upcoming changes. How Complyport Tech may assist Complyport Tech is a leading award-winning global regulatory technology provider, highly regarded for its proprietary reporting technology and exceptional client-centric after-sales support. As one of the first providers in Europe to report under the European Market Infrastructure Regulation (EMIR), with billions of transactions reported successfully so far, we have built a reputation for excellence, coupled with the necessary regulatory expertise and technological innovation to assist firms in navigating their respective regulatory obligations. Contact our team of experts to find out how you can benefit from our innovative and comprehensive regulatory reporting solutions.
Regulation 2022 Roundup: The Calm Before the Storm?
Complyport Tech’s Senior Manager and Head of the Compliance Assurance Department, George Markides, offered his insights on the global regulatory reforms and challenges of 2022 in an article in Finance Magnates. Read the full article here. The article discusses, among others, the impact on brokers of several reforms and remarks made by the regulators, such as EMIR 2.0 – EMIR Refit and ASIC. Moreover, the article refers to the passporting regime of licenses in the European Union and what to expect in 2023 in terms of regulation.
EMIR Refit RTS/ITS: reporting under the new standards
The EMIR Refit technical standards (RTS and ITS) were published in the Official Journal of the EU on October 7th 2022. With the compliance date now set on 29 April 2024, counterparties will need to report under the new standards, including upgrading outstanding derivatives to the new reporting standards. Some of the key differences that the EMIR Refit package brings are: New ISO 20022 XML Data Format. Unique Product Identifier (UPI) to be used where an ISIN is unavailable. Position-level reporting will be selected over transaction level where the conditionalities of the RTS/ITS are met. Additional details and values to be included in the report regarding, collateralisation, the reporting of corporate events and the direction of the transaction etc. New data points, for example, Post Trade Risk Reduction (PTRR), events (e.g., Compression), identifiers for crypto derivatives, additional points on asset characteristics, information on delta values etc. Delegated Reporting – Report Submitting Entity (RSE) must provide the Entity Responsible for Reporting (ERR) with transparency to the records reported on their behalf, and to any data quality issues encountered. Introduction of an Errors and Omissions notification to NCAs. A new provision by ESMA, that would require the counterparties to have in place written internal procedures to resolve any reconciliation break identified by the Trade Repositories (TRs). Increase in the number of reconcilable fields to be reconciled from the date when the new RTS/ITS package begins to apply with several more fields becoming reconcilable 2 years after the go-live date. ATTENTION Valuation becomes a reconcilable field. This means that where 2 EEA counterparties to a derivative contract respectively mark-to-market the valuation amount of said contract, if those values are outside tolerance level, this field will not reconcile, and the transaction will not be matched. Trade Repositories in case of a paired report between 2 EEA counterparties that have not been reconciled (matched, field by field) will stop attempting to reconcile the derivative 30 calendar days after the derivative ceases to be outstanding. Complyport Tech is a leading award-winning global regulatory technology provider, highly regarded for its proprietary reporting technology and exceptional client-centric after-sales support. As one of the first providers in Europe to report under the European Market Infrastructure Regulation (EMIR), with billions of transactions reported successfully so far, we have built a reputation for excellence, coupled with the necessary regulatory expertise and technological innovation to assist firms in navigating their respective regulatory obligations. Contact our team of experts to find out how you can benefit from our innovative and comprehensive regulatory reporting solutions.
Key points from FCA’s market Watch – How Complyport Tech may assist
On the 3rd of October 2022, the UK’s FCA issued Market Watch No 70 focusing on MiFIR transaction reporting issues. The FCA identified several areas of concern including: The proper reconciliation of trading records with data held by the regulator. Promptly notifying the FCA of an error or omission within a transaction report. In determining the meaning of ‘execution’, UK branches of third-country investment firms must consider additional criteria and not rely solely on the geographic location of a trader. Misuse of the ‘INTC’ reporting convention. Firms are reporting a market identifier code (MIC) when transmitting an order to an executing broker who then executes the transaction on a trading venue. The venue field should be populated ‘XOFF’ by investment firms that are in a chain and do not access the venue directly. In the case of transactions executed in financial instruments that are not admitted to trading or traded on a trading venue (e.g., CFDs), the instrument’s reported name should contain a clear description of the financial instrument traded (e.g., Vodafone CFD). We at MAP Fintech, a pioneer in providing software as a service solutions, have created a platform that provides MiFIR (both EU and UK) obliged entities with a powerful automation tool that creates and submits timely, accurate, and complete transaction reports. The Polaris Platform is geared towards firms with demanding reporting schedules that require a one-stop shop for their reporting needs. Moreover, the platform is supported by a dedicated support team that can help with technical (e.g., platform integration), as well as compliance queries. As such, we can assist firms to safely navigate the regulatory regime and avoid pitfalls such as the ones identified above by the FCA. Finally, our team can perform in-depth health checks on your current reporting setup to identify any shortfalls and suggest the appropriate remediation measures to ensure ongoing compliance. Contact our team of experts here.
EMIR/MiFIR Efficient Transaction Reporting Monitoring: What Does Your Organisation Need to Do?
Did you know your transaction reporting obligations don’t end when the necessary information has been submitted to the authorities? Besides providing the relevant data, you still need to confirm that the transaction reporting occurred in a timely and accurate manner as it’s required by the regulation. This, in turn, raises another crucial question: What exactly does “timely and accurate” mean, and how does this play a role in the efficient monitoring process? Timeliness of Reporting Generally speaking, Transaction Reporting must be done on a T+1 basis. T+1 means that the reporting must take place by the end of the next (local) business day from the execution of the transaction. To achieve this, you need to ensure that: Any reporting data is provided at a designated time that is agreed with the Competent Authority (CA) /Service Provider (SP). Processing of the data from the CA/SP is performed on time so that you may have enough time to react in case of negative feedback. Any resubmissions that need to be done must be submitted as early as possible. The above steps will ensure that you have reported and handled any rejections within T+1 and, ideally, within your working hours. Data Accuracy Accurate data is critical when it comes to reporting. The obligation is not only to carry out the reporting (i.e. submit the data to the authorities) but to do it in the right way. Therefore, it is important to automate this process as much as possible. The less human intervention applied to the data, the fewer potential mistakes that might occur. Monitoring of the Reporting When the reporting has been performed, it would be prudent to perform, on a daily basis, a reconciliation that follows some specific checks. Then, a more in-depth reconciliation should be carried out on a weekly or monthly basis. Daily reconciliation should be performed once the reporting has been finalised and, ideally, you should check on the following: The timeliness of the reporting. Has the reporting been done within T+1? The number of transactions reported. Does the number match the number of transactions in the trading system? Ideally, you should also check the number of different reporting messages (new, termination, modification, valuation, etc.) vs the relevant actions on the trading system (openings, closings, modifications, transactions that remained open overnight, etc.) If any rejections have been received, you need to take corrective measures within the day to meet your T+1 obligations. Weekly or monthly reconciliation will allow you to go deeper into the reporting process and identify possible errors. This process would include the following: Performing a health check of the process you have in place, mainly on the data extraction. This will ensure that the data is provided on time and that you do not have any unexpected or unattended internal issues. Checking that the source data provided to the service provider or used for reporting is accurate and in line with your trading setup. Some core fields you could check are price, execution time (in UTC), notional amount, counterparties, and side of the trade (buy or sell). Making sure that procedures are up to date when it comes to adding new financial instruments in your trading setup and, subsequently, to your reporting, and that you avoid underreporting or overreporting. This also relates to any new clients, especially NFCs within EEA and other broker clients that need to be identified within the reporting using their corresponding LEIs. Performing reconciliation in case you delegated your reporting to other counterparties to make sure that the transactions they report on your behalf are in line with what you have in your trading system, as well as the data reported is accurate. All of the above assist in the efficient monitoring of your transaction reporting. The sequence in which you perform these steps depends solely on your own preferences. However, you need to keep in mind that this process is critical in making sure that you have met all your reporting obligations. Monitoring is an ongoing process and, given the latest Data Quality Reviews performed by the regulators, ensuring that all goes well is of paramount importance. To achieve this, a structured monitoring process must be in place. Complyport Tech is one of the earliest innovators in the RegTech space, being highly regarded for its Regulatory Transaction Reporting Technology and exceptional client-centric after-sales support. If you are having difficulty implementing the above, you can contact our team of experts here.
Reducing Compliance Costs: The Value of Outsourcing Regulatory Reporting
Regulatory reporting consists of the submission of data to national competent authorities (NCAs) or authorised Trade Repositories in order to comply with the enacted regulatory provisions. Simply stated, it is the process financial services firms must follow to demonstrate compliance with the established rules. This so-called cost of compliance is materially significant and burdensome. However, the opposite is also true; the cost is even greater when it comes to non-compliance! In this article, from our experience as industry veterans, we will examine the many factors involved in the cost of compliance and determine whether a business should undertake such an enormous endeavour organically or, from a cost/benefit analysis, rely on the resources and expertise offered by a third-party. Going at It Alone: What Should You Consider? Below are some points companies must consider when deciding whether they should self-report or opt for a third-party solution. Technology & Implementation: Start-up costs Hardware Software (proprietary or licensed) Extraction and consolidation of data of various formats from multiple sources with the interpretation of regulatory complex requirements/fields Connection fees (direct data submission to NCA (where applicable)) Development team and support Hosting Regulatory Compliance: Multi-jurisdictions (if applicable) Technical standards requiring deep-dive analysis and comprehension Monitoring and reconciliation Staying up-to-date with amending reporting requirements Reporting: The higher costs associated with direct reporting to a Trade Repository (TR) as opposed to the cost savings available through the synergies and where applicable (aggregation) offered via a trusted third-party provider. Human Capital: Cost of employing experienced professionals Required continued training The above is not exhaustive but provides a high-level overview of the many factors to consider when studying the cost of compliance. Fortunately, there are many solutions available that allow financial institutions to free up capital and resources and concentrate on their core business. Most importantly, by utilising an established third-party vendor, one that has specific regulatory reporting expertise, the required capital investment in infrastructure, and supplementary dedicated support, financial institutions may benefit from the inherited synergies and economies of scale offered by such a large specialist provider as opposed to going solo and self-reporting. As Malcolm Gladwell discusses in his bestseller, Outliers, “to become an expert it takes 10,000 hours (or approximately 5 years full-time work) of deliberate practice with an eye on mastery.” With the ever-changing regulatory landscape, it is important to be mindful of the inherent risks and ever-present pitfalls that can plague non-discerning participants. Utilising a professional service provider can help navigate through this cumbersome process. The real cost of compliance is the price of admission. As discussed above, an in-house solution should not be taken lightly. Whereas, when considering the options available, outsourcing offers a lot more for less. Leverage the Power of RegTech with Complyport Tech Complyport Tech is highly regarded for its regulatory technology (RegTech) and services innovation. We help clients push the boundaries of what’s possible in regulatory technology, delivering deep expertise and innovative solutions. All our solutions are offered under our award-winning Polaris Platform, which provides our clients with peace of mind and allows them to concentrate on what they do best. Our services are bundled with solutions from some of the biggest vendors in the market, ensuring quality service. At the same time, we cover our clients’ regulatory reporting needs via our compliance expertise. This solution has been developed in-house, which provides our clients with complete control of the entire reporting process—from data sourcing to validations, enhancements, generation and submission of the reports, and receival and presentation of feedback, all via a user-friendly portal. It also delivers unparalleled flexibility to quickly adapt to new and evolving regulations and the highly dynamic regulatory environment. Matching this adaptability with our unwavering commitment to customer service and innovation has allowed us to be one step ahead of the competition. Finally, the platform works with existing systems, so there is no need for the user to adopt new technology. Data is extracted from the client through DB extraction or is pushed by the client to our side within CSV files over SFTP. Contact our team of experts for more information and a demo of our award-winning Polaris Platform.