The UK Financial Conduct Authority (FCA) and the Bank of England have launched a joint consultation on changes to reporting requirements, procedures for data quality and registration of Trade Repositories under UK EMIR.
The regulators explain that they aim to align the UK derivatives reporting framework with international guidance issued by the Committee on Payments and Market Infrastructures and International Organization of Securities Commissions (CPMI-IOSCO), where appropriate, to ensure a more globally consistent data set. This will enable authorities to better monitor for systemic and financial stability risk, particularly given the global nature of the derivatives market.
The FCA and the Bank of England are proposing measures relating to mandatory delegated reporting requirements, counterparty notifications and reconciliations processes and the use of XML schemas and global identifiers. These proposals aim to provide clarity to counterparties and Trade Repositories (TRs), including on areas where there are discrepancies on how certain data fields are reported.
The FCA is also proposing new targeted requirements for TRs in relation to the registration and reconciliation processes, to streamline the process for registration, ensure consistency of reporting and improve overall data quality.
The regulators are proposing to amend the table of reportable fields in the relevant technical standards under UK EMIR, primarily so it aligns with international guidance issued by CPMI-IOSCO. This will ensure that UK authorities have access to a comprehensive derivatives data set so authorities in the G20 jurisdictions can monitor systemic risk in a globally consistent manner. They are also proposing specific changes to reportable fields to provide clarity to counterparties and TRs where there are existing uncertainties.
Another proposal concerns notifications and reconciliation processes for counterparties. These will help ensure that errors and omissions are notified to the appropriate regulator, and reconciliation breaks are resolved quickly, helping to maintain accurate and high-quality data.
The regulators also consider introducing specific requirements for the mandatory delegated reporting requirements under UK EMIR in the relevant technical standards. UK EMIR requires non-financial counterparties (NFCs) who benefit from mandatory delegated reporting when trading derivatives with a financial counterparty (FC) to provide information to the FC that the FC would not otherwise be expected to know.
The new proposals set out the arrangements the FC should put in place for the timely provision of relevant information by the NFC. This is to ensure that FCs have the necessary information to meet the mandatory delegated reporting requirements.
According to the proposals, there will be specific requirements for the use of global identifiers, including the use of Legal Entity Identifiers (LEIs), Unique Trade identifiers (UTI) and Unique Product Identifiers (UPIs). These proposals look to promote consistency among counterparties in how global identifiers are used, helping to improve overall data quality.
The FCA is proposing amendments to the registration process for TRs to streamline the process for TRs that are already registered or recognised under the Securities Financing Transactions Regulation (UK SFTR) and to incorporate the payment of the relevant registration fees. These changes are aimed at aligning the registration processes under UK EMIR and UK SFTR.
In addition, the FCA is proposing new requirements for TRs aimed at improving data quality and promoting consistency of reporting. The proposals will ensure procedures and policies are in place for the effective reconciliation of data between TRs; to verify that the reported data is complete and correct; and the orderly transfer of data between Trs.
Interested parties are invited to comment by 17 February 2022.