With EMIR Refit around the corner, regulators are increasingly turning their attention to the accuracy of transaction reporting by firms in their purview. We have recently seen CySEC making enquiries to investment firms about pairing and matching discrepancies that have been identified in their EMIR reports.
What are ‘Unpaired Reports’?
When the ‘other counterparty’ to a transaction is an European Economic Area (EEA) counterparty and not an individual, there is a requirement under EMIR that the ‘Reporting Firm ID’, ‘Other Counterparty ID’ and ‘UTI’ should match between the two reports. When the regulator is not able to locate the other side of the transaction based on the two counterparties’ LEIs and the UTI, the transaction will be marked as ‘Unpaired’.
Why are the transactions not getting paired?
There could be a couple of reasons why the transactions are not getting paired:
- The other side of the transaction has not been reported or,
- The transaction has been reported with a different UTI.
What should you do?
Both ESMA and the FCA have placed great emphasis on the UTI matching quality. The UTI generation waterfall developed by CPMI-IOSCO has been introduced for both EU and UK EMIR Refit 2024.
In order to submit reports with consistent UTIs, investment firms should first determine who is responsible for generating the UTI, using the UTI generation waterfall. It is common for firms with sizeable trades to generate the same UTI based on an agreed methodology and a common trade ID from a trading platform or execution management system E(MS).
In cases where firms are not able to obtain the UTI from their Liquidity Provider or generate a consistent UTI, firms need to look at alternative solutions such as delegating the reporting to their Liquidity Provider.
Arrangements should be in place between counterparties prior to EMIR Refit going live. The approach to UTI generation should be clearly communicated and aligned between all parties involved in the trade.
How TRAction can help?
Efficiencies could be achieved where both counterparties use the same delegated reporting provider, such as TRAction, to process and submit EMIR trade reports on their behalf. This way neither counterparty will have to worry about inconsistencies in methodology or interpretation as TRAction can ensure the UTI and other fields are reported in a consistent manner.
Should you need further assistance with regards to your reporting requirements, please get in touch with us.
