Reconciliation Phase II (Phase II) is to go live in April 2026 for EU EMIR and September 2026 for UK EMIR. These dates are 2 years after the implementation dates for EMIR Refit for both jurisdictions.
Phase II brings with it:
- 61 brand new fields which are to be added to the scope of both inter and intra TR reconciliation and also includes valuation updates; and
- 4 new reconciliation statuses in Reconciliation and Trade State reports.
The EMIR Refit Validation Rules (EU) provide a ‘Reconciliation Tolerance’ column, specifying whether the item allows for any tolerance in terms of matching. For example, for item 25 (Delta), the reconciliation tolerance column provides ‘yes’, that there is tolerance where fields do not entirely match – this may also be subject to certain conditions. Of the 61 brand new fields, 39 have ‘no’ tolerance and therefore have to match exactly, with the remaining 22 allowing for some tolerance or flexibility. For more information on pairing and matching for EMIR see our article here.
Of the 22 fields that do allow tolerances, we sample a few below that will likely be of most interest and relevance. For example, in relation to basket indexes, if parties do not list all the underlying constituents, matching will not occur.
| EMIR Fields (EU) | What is it? | What is required under the Validation Rules | Tolerance allowed | Example |
|---|---|---|---|---|
| Delta (item 25) | The ratio of the change in a derivative’s price to the underlying’s price and applies only to options and swaptions. Delta updates are to be reported daily by FCs and NFCs. | Up to 25 numeric characters including up to 5 decimal places (and not counting the decimal mark/point). If there is a figure beyond 5 decimal places, it shall be rounded half-up. Any value between (and including) -1 and 1 is permitted. | Up to second digit after decimal (rounded). | 0.45 – would be an acceptable figure as it falls within the allowed range between – 1 and 1 and has two decimal places (if it was rounded). 0.449 – would not be acceptable and would need to be rounded up to 0.45 to be acceptable. |
| Identifier of the basket’s constituents (item 18) | If there is a custom basket comprising financial instruments traded on a trading venue, only they are to be listed. | Where the underlying identification type is ‘B’ (for basket), all individual components identified through ISO 6166 ISIN are to be entered. | Applies only when field 2.13 has ‘B’ i.e. the “Underlying identification type” is basket. | XS9999999990 – would be acceptable. XS9999999990 XS8888888880 – would not be acceptable as there needs to be a comma separating the ISINs if there are multiple instruments. XS1231231230, XS9999999900 – would be acceptable given the comma separates the multiple ISINs. |
| Valuation amount (item 21) | This refers to the ‘mark-to-market valuation’ or ‘mark-to-model valuation’ of a derivative contract. (Note that the CCP’s valuation is used for cleared transactions). | Up to 25 numeric characters including up to 5 decimal places (can be positive or negative value). If there is a figure beyond 5 decimal places, it shall be round half-up. The decimal mark and any negative symbol (for negative values) do not count as a numeric character. | We focus on the ‘mark-to-market valuation’ and if the field 2.24 for Valuation type is “MTMA”, the tolerance allowed is the upper/lower threshold ± 2.5% from mid-valuation amount (i.e. absolute average of the two valuation amounts). We have not discussed ‘CCP valuation’ or ‘Mark-to-model valuation’ which was also specified in the ESMA Validation Rules for this item. | See two CFD traders with the following mark to market valuations of their CFD trade: Example 1: Trader A reports a MTM valuation of $50. Trader B reports $70. The mid-point is $60, and 2.5% of $60 is $1.50, meaning an acceptable range is $58.50 – $61.50. Since the $20 difference is out of this range, this example would be unacceptable and fail the EMIR tolerance rules. Example 2: Trader A reports a MTM valuation of $50. Trader B reports $52. The mid-point is $51, and 2.5% of $51 is $1.275, meaning an acceptable range is $49.725 to $52.275. Since both valuations fall within this range, this example would be acceptable. |
Note that the EMIR Validation Rules (UK) also broadly align and are consistent with the EMIR Validation Rules (EU), so the above table and specified EMIR Validation Rules would equally apply for the UK.
How can TRAction assist?
If you would like to understand more about pairing and matching of reports, please reach out to our team at TRAction. TRAction performs trade reporting for its clients in respect of all global trade reporting regimes and is well apprised with global regulatory updates.
