Preparing for EMIR REFIT – Should you start preparing?

There is no shortage of content discussing the upcoming EMIR REFIT update to technical standards and its addition of new fields, submission format and approach to lifecycle reporting. However, with the regulation change only arriving sometime in 2024, we are often asked if it makes sense to start preparing now, and if yes, in what way?

The reality is that the answer is different for each firm. It can depend on resources, their current process and what products they report that are under scope for EMIR. In our summer edition of EMIR Preparation blogs (links below for previous articles), we cover some of the points we think make sense to start looking at already.

Resources – Answering how a firm is planning to handle the EMIR REFIT, along with similar changes arriving in ASIC and MAS reporting in 2024 is an important start on the preparation journey. In our experience with clients, there has been feedback from many firms that they created a reporting process with the go-live of EMIR in 2014. That format has been iterated to handle periodic changes to EMIR, most recently being Brexit and margin field updates in 2021.

What worked in 2014 might not be relevant now, with lots of firms employing EMIR reporting processes that use workarounds and manual inputs to comply with 2022 standards. As a result, many companies are using the larger 2024 REFIT to apply structural changes to their reporting process which means having human and technology/data resources in place to support this move.

For firms falling in this bucket, now is already the time to start planning as it means evaluating what changes will be needed, build vs buy decisions, what resources are needed and creating budgets. Many companies have indicated that the latter point of budget approval is top of their mind and often the most important aspect they are currently working on for their EMIR REFIT preparation.

New fields with new systems – Is your company adding or replacing trading systems? If yes, then now is a good time to look over the new fields being introduced with the REFIT and ensure they are being captured by the new system. While this item doesn’t affect many companies in their EMIR preparations, data capture is often overlooked during the evaluation stage for new software.

Specific items to look at are new asset class specific fields such as Spreads and Day Count basis on floating rates, Delta details on Options and Payment details for Credit events.

Counterparty data – Continuing on the trend of new fields, in our April blog (link) we covered the additional counterparty fields needed to be collected and reported under REFIT. In some ways, the change is similar to that of MIFID II, where Transaction Reporting required the use of mandatory LEIs and Personal Identification Information (PII) such as National IDs and Passport numbers from retail clients and internal traders and portfolio managers. Firms that took their time collecting this information ended up with situations where a portion of their transactions were unreportable (LEIs not created in time) or submitted late.

For EMIR, due to the need to gather data from existing clients and counterparties as well as create a process to easily collect it from new ones, focusing on these fields now is another area where companies can already start preparing how they will collect and share this information.

Lifecycle events – Being introduced for REFIT are new lifecycle events which cover situations such as corporate events, derivative exercises and risk mitigation processes. With them, firms will now need to document for these events when reporting certain New, Modify and Termination messages. For example, changes to a derivative price and quantity or issuing of new contracts due to a stock split of the underlying would trigger a Modify and New message respectively using the Corporate Action Event Type. Factoring how these events are captured into internal systems and available for EMIR reporting is an area where it may make senses to start reviewing now.

Reading and documenting – Last but not least, now is a great time to be reading up on ESMA and the FCA’s latest consultation papers. Although they run over 200 pages, they are mandatory reading for understanding the changes and how they apply to a firm’s trading scenarios.  From our experience, we have found it useful to document and highlight major changes and challenges brought up by the regulators and share these with colleagues. Having multiple perspectives on regulatory documents brings clarity and raises possible issues and pitfalls that can occur without proper planning.

Hope you found this post useful along with all of our preparation blogs.

Ron Finberg
About the author: Ron Finberg
Ron is a Product Specialist Director at Global Regulatory Reporting Solutions, S&P Global Market Intelligence and helps customers with their compliance of EMIR, MIFIR, SFTR, MAS and ASIC derivative reporting. Ron is an ongoing contributor of regulatory focused content and webinars and leverages his over 20 years’ experience in the financial industry. He was also awarded the Editor’s Recognition Award for Best RegTech Vendor Professional in the RegTech Insight Europe Awards 2021.