The European Market Infrastructure Regulation (EU) No 648/2012 (EMIR) is the European legislation for the regulation of over-the-counter (OTC) derivatives.
The new Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) are revisions of the existing applicable standards. They entered into force on 10th February 2017 and will apply from 1st November 2017.
The major changes are in relation to:
• Instrument classification – CFI Codes
• Replacement of “Contract with non-EEA counterparty” Field with a compulsory field for country of the counterparty
We strongly suggest that all financial firms start to undertake a review of their data and systems in preparation for populating the new EMIR fields in an accurate and timely manner.
Instrument classification – CFI Codes
The new RTS requires transaction reports to include Classification of Financial Instrument (CFI) codes – for some counterparties this could be their first experience assigning instrument classification to their product offering. Classification of Financial Instrument (CFI) Code is used to define and describe financial instruments as a uniform set of codes for all market participants. ISO 10962 provides a global standard for these classifications in the form of specific codes that detail the category and attributes of an instrument. The population of a CFI Code is required in EMIR transaction reports regardless of execution venue or whether or not an ISIN exists for the instrument. Don’t forget to read our next blog for in-depth information on what you need to do in preparation for CFI codes.
Replacement of “Contract with non-EEA counterparty ” Field with “Country of the other Counterparty” Field
A two letter country code of where the registered office of the other counterparty is located or country of residence in a case where the other counterparty is a natural person will be required, rather than the previous field which flagged whether or not the other counterparty was located in the EEA. This information will need to be readily accessible to facilitate accurate population and isn´t necessarily incorporated into trading systems currently.
Getting started early – Trade Repositories UAT Environments
It is quite likely, due to the requisite system changes required at Trade Repository (TR) level to accommodate the revised reporting standards, that the new standard of reporting will be implemented by most firms ahead of the Wednesday, 1st November 2017 application date. The additional risk attached to a midweek rollout would mean that weekend of the 28th/29th October 2017 is a more realistic implementation date for TR acceptance of the revised EMIR reporting standards.
Several of the TRs have opened up User Acceptance Testing (UAT) environments for users to test their submissions in the new format. This allows counterparties a couple of months to make sure they can identify any weaknesses in the reporting framework and meet the revised transaction reporting standards.
If you would like to discuss the above or learn how it may apply to you, get in touch with TRAction Fintech.