Market Watch 84 is the latest release from the UK’s Financial Conduct Authority (FCA). It focuses on the year since UK EMIR Refit implementation, with observations on:
- EMIR Refit’s implementation,
- change and vendor management, and
- errors and omissions notifications.
Accurate and complete data in transaction reports is crucial according to the FCA (and other regulators globally). Although this Market Watch focuses on EMIR, firms that are also subject to UK SFTR and UK MiFID should also consider these findings.
FCA’s Focus Points:
Implementation of UK EMIR Refit
There was a 6-month transition period allowed after UK EMIR Refit came into effect in September 2024 (Go Live). This period allowed for counterparties time to ‘uplift’ their existing transactions to bring them into compliance with the new requirements (e.g. the schema) by 31 March 2025. The FCA observed various approaches to ensuring compliance. Some firms “updated their entire population or specific asset classes on the first available reporting date. Others took a more staged approach throughout the transition period.”
By the end of the transition period, the stats came back that 95% of reports were successfully uplifted by in-scope firms. There were still a small of number counterparties with reports that had not been uplifted by the end of March 2025 resulting in breaches of their reporting obligations.
Errors & Omissions
Since Go Live, 267 distinct breach notifications were received by the FCA in relation to errors or omissions in reporting. This is lower than what they expected, which suggests that firms may not be adequately reporting all material issues – which further connects to the possibility that firms may have varying governance thresholds around what a ‘material’ breach is.
FCA Advice:
- Firms are to err on the side of caution – if in doubt on whether an error is ‘material’, submit a breach notification to the FCA. “Notifications should be comprehensive, including adequate background to enable a full review of the incident.”
Change Management
Industry was provided with 18 months’ notice of UK EMIR Refit. Although 95% of firms were compliant by the end of the transition period, the FCA identified the below statistics post implementation date:
- 19% of counterparties – encountered some challenges with reporting
- 1.45% of counterparties – failed to report their trades entirely
The FCA has observed that the below are the main pressure points which contributed to problematic implementation of UK EMIR Refit:
1. Resource planning was insufficient
- Planning for resources was not appropriately organised ahead of implementation by some firms.
- Key person dependencies caused issues with progression of project plans.
- The above points caused for system testing to be delayed along with discovery of issues and little time for resolution.
- Many firms failed to engage with the FCA once material challenges were identified.
FCA Advice
- Change management activities and projects need to have appropriate resourcing allocated in times of regulatory change.
- Clear policies and procedures need to be in place along with effective documentation in relation to regulatory change.
2. External vendor reliance
- There was an increase in third party vendor assistance for reporting. Many vendors have increased their daily reporting significantly (some have doubled) since Refit.
- Some vendors were not able to assist their clients in meeting implementation given they had limited resources, with clients competing for priority of attention.
- FCA have seen that some vendors have submitted poor-quality reports on behalf of counterparties (caused by inaccuracies in data mapping, enrichment and schema logic).
FCA Advice
- Firms need suitable systems and controls in place for compliance with regulatory obligations.
- Firms are to ensure reports submitted on their behalf by vendors are complete and accurate. Where vendors fail to do so, firms are to notify the FCA by submitting a breach notification.
Next Steps
The observations in this Market Watch should be read alongside Market Watch 82 (for a summary of this please see our article here). The FCA asks firms to prioritise data quality improvement over the next 12 months. In assisting industry, the FCA will also increase focus on reconciliation rates, monitor breaches closely and assess counterparties’ systems and controls.
How can TRAction assist?
TRAction is committed to keeping trade reporting accurate and simple. We are actively ahead of regulatory developments and monitor for changes that may affect our clients. Please do not hesitate to contact us if you would like to know more about transferring your delegate trade reporting service over to us or just want to have more know-how on certain trade reporting issues.
