Refit, Rewrite, RTS, EMIR II; Navigating the Maze of EMIR Version Names

Refit, Rewrite, RTS, EMIR II; Navigating the Maze of EMIR Version Names

Regulatory reporting is hard enough without the confusion over which version of each regime is the latest. EMIR has gone through a number of variations since it was first implemented in 2012. We thought it would be a great time to outline what the EMIR version names relate to and where we are currently at as we anticipate further changes to the regime.

TermBackgroundExplanation of Changes
EMIR 1.0European Market Infrastructure RegulationUsed retrospectively to refer to EMIR regulation prior to the introduction of EMIR Refit in June 2019. The core difference between EMIR 1.0 and following versions of the regime is that EMIR 1.0 did not:
• capture alternative investment funds (AIFs) and their managers;
• have a category for small financial counterparties (SFCs);
• refine the clearing threshold calculation and subsequent obligations for NFCs.
EMIR RTS and ITSRegulatory Technical Standards and Implementing Technical StandardsIntroduced in November 2017, the RTS and ITS served to improve the quality of the data received by TRs and ESMA.

The RTS and ITS comprised several significant changes to EMIR reporting including:
• an increase in number of fields from 85 to 129;
• validation rules for reports both at trade and position level;
• validation rules dependent on each Action Type; and
• more detailed instructions with respect to N/A values.
EMIR Refit (also referred to as “EMIR II”)REFIT is the acronym for the European Commission's Regulatory Fitness and Performance programmeEMIR Refit was introduced in June 2019 to simplify the regulation, and reduce regulatory and administrative burden where possible after the European Commission noted several problems with the current EMIR regime including:
• disproportionate compliance costs;
• transparency issues; and
• insufficient access to clearing for certain counterparties, particularly non-financial counterparties (NFCs).

EMIR Refit amended the EMIR regulation in respect of the:
• clearing obligations;
• reporting requirements;
• risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty (CCP); and
• registration and supervision of trade repositories (TRs).

EMIR 2.2European Market Infrastructure RegulationEMIR 2.2 came into effect in January 2020 and categorised all non-EU CCPs into Tier 1 and Tier 2. It is contingent upon ESMA’s determination of the CCP’s systemic importance to the EU. Those CCPs deemed Tier 1 (non-systematically important) continue to operate as normal, while CCPs in Tier 2 (systematically important) are subject to supervision requirements and the obligation to comply with requirements as set by EU central banks.
(also referred to as “UKMIR”)
The United Kingdom’s “onshored” version of EMIR due to BrexitAlthough UK EMIR is largely identical to that under EU law, key points of difference include:
• change in governing bodies – the UK Treasury and the FCA now performs functions that were previously undertaken by the European Commission and ESMA, respectively; and
• third-country counterparties (and their UK branches) are outside the scope of UK EMIR meaning EU counterparties will generally continue to be captured under EMIR.
EMIR RewriteRefers to the proposed amendments to EMIR Refit and the further development of RTS and ITS in ESMA’s Final Report published on 17 December 2020Amendments outlined in ESMA’s Final Report were submitted to the European Commission in December 2020. Once endorsed, ESMA will have an 18-month implementation window (Q1 2023).

The fundamental changes under the EMIR Rewrite comprise the:
• adoption of ISO 20022 XML message format aligning EMIR with SFTR;
• adoption of global standards i.e., Unique Transaction Identifiers (UTIs), Unique Product Identifier (UPIs) and other trade and instruments definitions;
• updates to lifecycle definitions and components to provide more granularity;
• fields found to provide little value are to be removed; and
• better support for the reporting of crypto-assets.

As it stands, we await the implementation of the EMIR Rewrite. The changes proposed in EMIR Rewrite are largely attributed to ESMA’s aim to align EMIR with agreed upon global standards and to improve data quality. Of further note, the EMIR Rewrite will require firms within scope to undertake significant updates to their reporting logic due to the additional data fields required under this version of the regime.

Should you need further clarification on how the EMIR Rewrite will affect your business operations or if you are overwhelmed by the additional requirements outlined, please get in touch with us.

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