UK EMIR Refit go-live date is set for 30 September 2024, prompting the most commonly asked question by Reporting Counterparties using TRAction’s services – what new information is required in UK EMIR Refit?
The upcoming changes require firms to adapt to new reporting solutions and processes ahead of the go-live date. By approaching the new requirements strategically now, firms can ensure readiness in the reports submitted to the FCA.
As TRAction submits the trades on your behalf to the Trade Repository, firms will need to provide us with the necessary data to meet the new requirements. We have listed the new information required in relation to counterparty, UPI and Option fields.
Counterparty Details
Previously, there were some fields that were only required for the reporting entity. However, they are now being introduced for counterparty 2. These fields are outlined in the table below.
Firms will need to obtain the data from their counterparty or customers. We recommend firms begin including these fields in the registration form or questionnaire upon onboarding new customers.
| The following are new counterparty fields required. | ||
|---|---|---|
| UK EMIR Refit Field Name | What It Means | What You Need To Do |
| Entity responsible for reporting* *applicable only to OTC derivatives | Usually this will be the same as the Reporting Entity unless the Financial Counterparty (FC) is reporting on behalf of a Non-Financial Counterparty (NFC) | As long as trades requiring delegated reporting are identified in the data you provide to TRAction, this field will be calculated and no additional flag is required. |
| Nature of Counterparty 2 | F = Financial Counterparty N = Non-Financial Counterparty C = Central Counterparty O = Other | Where an LEI exists, you will need to flag the nature of the entity (F, N or O). |
| Corporate sector of Counterparty 2 | The corporate sector has been expanded to FC and NFC which can be found in Annex – Table 1 in the FCA Standards Instrument. | ‘A’ – Agriculture, forestry and fishing; ‘B’ – Mining and quarrying; ‘C’ – Manufacturing; ‘D’ – Electricity, gas, steam and air conditioning supply; ‘E’ – Water supply, sewerage, waste management and remediation activities; ‘F’ – Construction; ‘G’ – Wholesale and retail trade, repair of motor vehicles and motorcycles; ‘H’ – Transportation and storage; ‘I’ – Accommodation and food service activities; ‘J’ – Information and communication; ‘K’ – Financial and insurance activities; ‘L’ – Real estate activities; ‘M’ – Professional, scientific and technical activities; ‘N’ – Administrative and support service activities; ‘O’ – Public administration and defence; compulsory social security; ‘P’ – Education; ‘Q’ – Human health and social work activities; ‘R’ – Arts, entertainment and recreation; ‘S’ – Other service activities; ‘T’ – Activities of households as employers; undifferentiated goods – and services – producing activities of households for own use; ‘U’ – Activities of extraterritorial organizations and bodies. Where more than one activity is reported, list the codes in order of the relative importance of the corresponding activities. Leave blank in the case of CCPs and other type of counterparties in accordance with Article 1(5) of Regulation (EU) No 648/2012. |
| Clearing threshold of Counterparty 2 | Report as ‘TRUE’ if the counterparty is above the clearing threshold and ‘FALSE’ if below the threshold. | Check every year if your customer is still under the clearing threshold in gross notional value: – 1 billion Euro (Credit or Equity derivative contracts) – 3 billion Euro (FX or Interest Rate derivative contracts) – 4 billion Euro (Commodity derivatives contracts and others) according to Article 4(a) or Article 10 of Regulation (EU) No 648/2012. |
| Reporting obligation of Counterparty 2 | Report as ‘TRUE’ or ‘FALSE’. For example, – where the counterparty 2 is an NFC-, the value should be ‘TRUE’ regardless of whether the NFC- decides to report itself. – if counterparty 2 is a natural person, they are not subject to reporting obligations and so the value can be ‘FALSE’. | TRAction can calculate this from the existing data. |
| Execution Agent | This is an optional field to identify the entity that executed the transaction on behalf of the counterparty, if applicable, binding them to the terms of the transaction (and is not a broker). | Identify the execution agent, if applicable. |
There is currently no centralised platform where firms can obtain each customer’s reference data. As this process will be reliant on firms submitting the information themselves and customer information being publicly available on a centralised platform, this will not be a workable solution.
Make sure to read our full post. What is the new corporate sector field under UK EMIR Refit?
ISDA has updated the ISDA Master Regulatory Disclosure Letter to include the new Counterparty 2 fields. This letter is meant for market participants to exchange information regarding counterparty status required in EMIR and UK EMIR.
Unique Product Identifier (UPI)
The role of the UPI is to uniquely identify an OTC derivatives product. It signifies a collection of specific values on the reference data elements which resides in the UPI Reference Data Library on ANNA-DSB.
If a UPI code exists, firms will have to obtain the UPI code from the UPI Library.
If a UPI is not available on the UPI Library, firms will have to provide ANNA DSB with a set of reference data elements values which represent a unique combination of characteristics related to the OTC derivative product.
When UK EMIR Refit goes live, Article 7 of Annex B of the Technical Standards on the Standards, Formats, Frequency and Methods and Arrangements for Reporting 2023, requires derivatives to be identified with an ISIN where derivatives are either:
- admitted to trading or traded on a trading venue; or
- traded on a systematic internaliser (SI) and the underlying is admitted to trading or traded on a trading venue or an index or basket is made up of instruments traded on a trading venue.
If a derivative does not meet (a) or (b) above, it should be identified with a UPI, even if the derivative has an ISIN.
Under the UK EMIR Validation Rules, ISINs and UPIs are not to be used simultaneously i.e. UPIs cannot be reported where an ISIN is given.
| UK EMIR Refit Field | What It Means | What You Need To Do |
|---|---|---|
| Unique Product Identifier (UPI)* *Applicable only to OTC derivatives. | A code which outlines the nature of the product being reported as they relate to reference data elements. | Obtain UPI from the UPI Library maintained by ANNA DSB. TRAction will do this for its clients. |
Unique Trade Identifier (UTI)
Reporting counterparties have to pair each unique transaction between trading parties using the UTI. Firms are expected to refer to the UTI waterfall to determine which firm should generate the UTI for different situations.
UTIs are to continue to meet the requirements in Article 8 of Annex B of the Technical Standards on the Standards, Formats, Frequency and Methods and Arrangements for Reporting 2023.
Firms with sizeable trades will likely have a ‘bilateral agreement’ on UTI generation with their counterparties.
Options Related Fields
As part of harmonising the data elements according to the CDE Guidance, there are a number of new option-specific fields being introduced.
| The following are fields applicable to Options and Swaptions only. | ||
|---|---|---|
| UK EMIR Refit Field Name | What It Means | What You Need To Do |
| Delta | This a valuation field which must be reported on a daily basis by FC and NFC, according to Annex Table 2 in the FCA Standards Instrument. | Calculate the ratio of the change in price of a derivative to the change in price of the underlying. |
| Option premium amount | The monetary amount paid by the option buyer. | TRAction will reach out to you to update the necessary required information. |
| Option premium currency | The currency of the option premium. | |
| Option premium payment date | The date on which the option premium is paid. | |
The changes in UK EMIR Refit aim to align the regime with agreed upon global standards and to improve data quality. Should you need further clarification on how the UK EMIR Refit will affect your business operations or if you are overwhelmed by the additional requirements outlined, please get in touch with us.
