EMIR Refit – Insights and Challenges One Year On

It has been over a year since the implementation of the European Market Infrastructure Regulation (EMIR) Refit in the EU and nearly a year since its UK equivalent.

EMIR Refit brought comprehensive changes to the transaction reporting under the EMIR regulation, including:

• The adoption of ISO 20022 XML,
• Significant increase in reportable fields, and the
• Integration of wider global data initiatives such as the Unique Product Identifiers (UPIs) and Critical Data Elements (CDEs).

The EMIR refit intentions were to enhance data quality, standardize data reporting processes and improve National Competent Authority's (NCA) regulatory oversight of derivatives markets. However, in-scope firms continue to face increased challenges and associated costs of ensuring compliance with the new reporting requirements.

What's at stake

FCA and ESMA's latest sanctions review shows dozens of fines and enforcement actions across the UK and EU since 2017, underlining the pressure on firms to get reporting right. And it's not just the fines. High rejection rates force firms into costly remediation and manual backloading. Every error drags resources away from clients and growth, while also putting firms on regulators' radar.

Key challenges firms are facing since the Refit

1. Move from CSV to XML

For firms who used csv-based reporting prior to the EMIR refit, the transition to the ISO 20022 XML format has created increased complexity. In many cases, this will have required a complete change in the reporting architecture, as well as upskilling reporting or development teams to support the XML standard. The new schema, which has 203 fields for EU and 208 for UK, requires extensive data mapping and sourcing.

1. Data Quality and Validation Struggles

One of the primary objectives of the EMIR Refit was to enhance the data quality of transaction data through harmonization, thus making it more usable for regulators in their market oversight. However, recent reports from both ESMA and the FCA highlight stubbornly high rejection rates at a field-level validation. Key rejection trends show missing or incomplete valuation data, formatting inconsistencies and outdated trade information as areas needing improvement for some firms.

Firms are required to create robust control frameworks to monitor the consistency, completeness and accuracy of reporting data. This is to avoid backloading of missing or inaccurate data, which is often a manual process.

1. Post Brexit Regulatory Divergence

While the EU and UK regulations are still very similar, the refit created further minor divergences between the two sets of reporting standards. As a result, firms with both an EU and UK reporting obligation face the added complexity of maintaining compliance with two similar-but not identical-regimes. Consequently, firms have been required to build and maintain parallel reporting logic, validation layers and exception-handling processes-doubling compliance effort in some cases.

1. UTI / UPI

As with the pre-Refit world, Unique Trade Identifier (UTI) generation and communication continues to cause challenges. Ensuring the common UTI is shared-before consuming and populating on the transaction message in time for T+1 reporting-is a key challenge for Buy Side firms, in particular.

The Unique Product Identifier (UPI) is a new identifier designed to provide greater granularity into derivative contracts. The complex taxonomy of derivatives means this has been a particularly challenging part of the EMIR Refit implementation. Reporting firms have had to insert and maintain greater levels of reference data into order management and middle office systems, with more complex instruments creating significant challenges in ensuring accurate UPI data.

What this means for you

The first year of the new regulatory standards has made it clear that all firms must ensure they have a solution that allows for full transparency into the reporting lifecycle, a thorough control framework and a knowledgeable, industry-engaged team.

Where to go from here

Regulators are still moving the goalposts. The FCA is consulting on changes. ESMA has paused some MiFIR updates. More tweaks are coming. If your reporting setup cannot adapt quickly, you will be playing catch-up again next year.

That is why we are offering reporting solutions that are transparent, scalable and ready for whatever comes next.

If EMIR Refit has left your team firefighting rejections, running manual fixes or struggling with dual EU/UK obligations, now is the time to rethink your approach. Contact us, and let's talk about how we can help.