UK EMIR: Consultation on draft Q&As for EMIR reporting

What is the consultation about?

The derivatives reporting regime under UK EMIR is changing substantially later this year – see our previous article for an overview and timeline for both UK EMIR and EU EMIR. In the UK, as part of the original consultation process, the Financial Conduct Authority (FCA) and the Bank of England (the Bank) received requests for supporting guidance on the changes and have now started to consult on the details.

The FCA has indicated that the guidance will take the form of questions and answers (Q&As) and will be divided into the following topics:

1. Transitional Arrangements
2. Reconciliations
3. Errors and Omissions
4. Derivative Identifiers
5. Action and Events
6. Venues
7. Exchange Traded Derivatives
8. Margin and Collateral
9. Clearing
10. Post Trade Risk Reduction
11. Position Level Reporting
12. Asset Class and Product Specific

The initial consultation runs from 1 to 28 March 2024 and covers topics one to five. The next consultation on the remaining topics is expected later in Spring 2024.

What should you be doing?

If you are subject to UK EMIR reporting requirements (whether as a counterparty or because you are the entity responsible for reporting in respect of a counterparty – e.g. the AIFM of an AIF trading OTC derivatives), you are encouraged to review and engage with these draft Q&As. While the Q&As are draft versions at this stage, they are indicative of the FCA’s initial approach on these topics and are therefore helpful to consider when developing or enhancing your systems, controls and processes.

In particular note that draft Q&A 3.2 makes it clear that:

“entities responsible for reporting are, at a minimum, expected to have systems and controls in place to ensure timely and complete reporting in accordance with Article 9 of UK EMIR.”

Draft Q&A 3.2 goes on to say that:

“In addition, entities responsible for reporting should ensure they have in place:

• effective governance to oversee their UK EMIR reporting
• effective systems and controls to identify and remediate errors and omissions (including the notification of any errors and omissions to the relevant Authority); and
• arrangements with counterparties to address reconciliation breaks

Entities responsible for reporting should assess the materiality of any errors or omissions in their UK EMIR reporting (including identification of any errors and omissions that are to be reported to the relevant Authority) based on the size, nature, and complexity of their business.”

As we move closer to the go live date of the new reporting requirements, bear these regulatory expectations (along with the other draft Q&As) in mind when considering whether your existing systems, controls and processes are sufficient or would benefit from some enhancements.

If you are subject to EU EMIR reporting requirements (the changes to which are going live on 29 April 2024 - some five months before the UK EMIR changes) then you will already be familiarising yourself with the guidance provided by ESMA in its final report on guidelines for EMIR reporting. In relation to the misreporting notification obligation, it is important to note that the EU EMIR requirements are much more detailed and granular (and the guidance on them runs to six pages in the final report).

We are advising a number of clients on the new EMIR reporting requirements, including in the context of their delegated reporting arrangements and misreporting notification obligations. If you would like to discuss any aspect of the new reporting requirements with us, please do get in touch.