Updated: Sep 6
EMIR refers to European Market Infrastructure Regulation, an EU regulation that has been in place since 2012 to monitor over the counter (OTC) derivatives markets. The European Securities and Markets Authority's Regulatory Fitness and Performance (REFIT) program is set to impact financial institutions and repositories that have an obligation to report derivatives, specifically the reporting of data, the reconciliation and validation of Critical Data Elements (CDE), data access by competent authorities and the registration of TRs.
In December 2022, The European Securities and Markets Authority (ESMA) published the guidelines and technical documentation for the EMIR Refit which some are referring to as EMIR 3.0. The refit aims to “further enhance the harmonisation and standardisation of reporting under EMIR”, which supports both EMIR’s main purpose of monitoring systemic risk as well as containing costs for market participants and trade repositories.
The EMIR Refit is set to go live the 29th of April 2024 in Europe and the 30th of September 2024 for the United Kingdom. These rules will apply to EU and UK counterparties from 2024 for both new and outstanding derivatives transactions. All counterparties will need to consider the impact of these new rules on their reporting systems, reporting agreements and internal procedures for identifying, remediating, and notifying regulators of reporting errors.
The countdown has begun – with just about eight months remaining until the European Market Infrastructure Regulation (EMIR) Refit comes into effect, market participants must prepare for a transformative shift in regulatory compliance. This article aims to provide invaluable insights, support, and a clear roadmap for those navigating the EMIR Refit journey. Our goal is to ensure that you are well-prepared to adapt to these regulatory changes seamlessly.
The EMIR Refit Timeline: The following should be completed by now or soonest.
Gap Analysis: It all starts with a comprehensive gap analysis. As of now, you should have a clear understanding of what adjustments are required within your existing technology, personnel, and processes. This phase is crucial as it defines the scope of change and sets the roadmap for its implementation. Any non-urgent matters that arise should be incorporated into your Refit plan.
Data Sourcing: Data is the lifeblood of regulatory reporting. If you find that you are unable to source all the required data, it's imperative to start developing plans on how to populate that data if it becomes mandatory. Pay close attention to conditional fields and their alignment with your workflows.
Furthermore, the below should either be ongoing or planned accordingly;
Third Party Integration - 1.5 months (09/23): If your firm relies on third-party service providers at any stage of your trading lifecycle, it's time to select your preferred vendor and finalize contracts. Additionally, consider whether UPI (Unique Product Identifier) licensing is required and ensure it's incorporated into your planning.
UAT Prep - 1.5 months (09/23): User Acceptance Testing (UAT) is a critical phase, and it's already open at key EU Trade Repositories (TRs). Larger firms should commence testing during the fall season. Given that year-end festivities can be distracting, completing a substantial portion of testing before this period is advisable.
Test Plan - 1-2 months (10/23): Develop a detailed plan and schedule for your testing activities. Ensure that teams dedicated to testing are well-versed in the upcoming changes and the implementation roadmap.
Testing - 2-3 months (11/23): By this stage, data should flow seamlessly end-to-end, from vendors, sources, and internal systems to the Trade Repository (TR) and back. The focus here is to execute your meticulously crafted test plan.
Accuracy - 5-6 months (01/24): Most of your high-priority flows should have undergone testing. It's time to assess the accuracy of your system's trade repository reports. While you may receive acceptances at the TR, it's important to remember that this doesn't necessarily reflect your internal systems. Addressing any defects at this point is prudent to avoid complications later in the project.
Preparing for Go Live - 7-8 months (03/24): As the go-live date approaches, prioritize defects by severity and assess what can be deferred until after the launch. Prepare your internal forums for potential regulatory notifications regarding post go-live fixes. Define handover and run books, and ensure that production teams are trained and well-versed in any outstanding issues.
Code Lockdown - 8.5 Months (03/24): It's crucial to lock down your code at least two weeks ahead of the go-live date. Any changes to the code after this point can be risky. Prepare to execute your run books.
Week Before Go Live: In the final stretch, remind global teams and service providers of the runbook plan. Ensure you have the right contacts in place for a smooth transition. Dedicate cross-functional staff for the weekend of April 27, the go-live date.
In addition to these practical steps, it's advisable to engage cross-functional teams periodically throughout the EMIR Refit project. Establish clear definitions of risks and ensure stakeholders have transparency on key milestones and deliverables. As the deadline draws nearer, best practice is periodic cross functional team engagement on the status of EMIR Refit.
Refit is setting new ground for transparency in regulatory reporting. The complexity of reporting rules will continue to grow, a combination of best-in-class technology and expertise will position organizations to rapidly address future requirements.
Join our webinar for more information and details on how Maycode can help you select the best technology and deploy our expertise for compliance.