A series of modifications shall come into force on 29 April 2024, relevant to the reporting obligations under EMIR of contracts to trade repositories (TRs), resulting from Regulation (EU) 2019/834, known as EMIR – Refit, of 20 May 2019, which has been developed by regulatory technical standards (RTS) and the implementing of technical standards (ITS) drafted by ESMA, along with additional ESMA guidelines adopted by the CNMV on 18 January 2024.
The RTS, ITS and the guidelines describe the details of reporting requirements to TRs, access to information and verification of data quality, in aims of ensuring consistent and accurate compliance with the reporting requirements.
Financial and non-financial counterparties participating in derivatives markets, subject to the reporting obligations, as well as entities acting on their behalf, are expected to use the content of these regulatory provisions, which can be found in the following links:
EMIR Refit’s reporting regime is carried out through RTS and ITS developed by ESMA and certain guidelines, which detail and explain additional issues related to the correct way to report contracts to TRs.
The new RTS regulate the items that must be included in notifications and their enumeration in presentation tables, as well as the different types of notifications, how they are structured into tables (counterparty information, contract and margin information), the data in fields within the files, the inclusion of new data fields, the obligation to report lifecycle events of derivative contracts, reporting of exposure and associated collateral, the alignment of field definitions to be reported with the definitions of critical data elements (CDEs) of the International Organisation of Securities Commissions and the Committee on Payments and Market Infrastructures (IOSCO and CPMI) as well as possible links between reports.
ITS establish data standards and formats for derivatives reporting, taking into account the reporting criteria set by the RTS. Particular attention is paid to the following aspects:
The use of extensible mark-up language (XML) (ISO 20022) and its enumeration in presentation tables, frequency and expiry of notifications related to lifecycle events occurred, as well as regular reporting elements such as contract valuations and their associated warranties, identifying the type of warranties used.
Identification of counterparties involved by means of the LEI code (ISO 17442), as well as their correct regular renewal and methodology to be applied in cases of changes or updates to the LEI of the counterparties involved due to corporate or other events.
Standards to specify the counterparty side and direction of different types of derivative contracts.
The identification of derivatives under ISIN (ISO 6166) and UPI (ISO 4914) codes as appropriate, as well as their CFI code (ISO 10962).
As a unique transaction identifier, the UTI code (ISO 23897), as well as its generation methodology and responsibility between the counterparties involved in a derivative contract.
The obligation to notify the National Competent Authority (NCA) in the case of relevant reporting errors, as well as reporting arrangements when a financial entity has sole responsibility, including legal, to report on behalf of a non-financial counterparty and arrangements ensuring that information of failures in reconciliation is taken into account.
Lastly, it establishes a 180-day deadline, after 29 April 2024, by which live derivative contracts must be reported updated to the new reporting requirements under EMIR – Refit.
Transitioning to the new reporting system according to the new RTS and ITS: In line with the new RTS and ITS, after 29 April 2024, all counterparties must notify of new transactions, modifications or cancellation of derivatives under such new requirements. Moreover, all counterparties have a 180-day deadline to update all active derivatives in line with the new standards.
Tables of reporting fields: The new regulation includes the reporting of information in three separate tables corresponding to information on: data on the counterparties involved, data on the contracts and information on margins.
Trade State Report (TSR files): The preparation of said files by TRs must be executed according to derivatives’ lifecycle events and the date on which they occur. In addition, the new regulation also specifies the management of historical files of this type of files by the TRs.
Determining the type of derivatives to be reported, reporting obligation of counterparties, reporting in specific scenarios and allocation of reporting responsibilities: Specific criteria is provided for reporting of different types of derivative contracts deemed as financial instruments by MiFID. It also details the reporting obligation for counterparties in specific cases, such as: intra-group transactions, non-EU subsidiaries, CCPs, private individuals, charitable or not-for-profit entities, specific entities outside the scope of application of EMIR Regulations, investment firms, intermediaries, among others. Special attention is given to the detailed description of reporting responsibilities for financial and non-financial counterparties, as well as investment funds and their corresponding managers.
Intragroup exemption from reporting: The requirements to be met to be exempted from reporting transactions between entities of the same business group are described, including requirements for applicants, regulatory deadlines, definition of ultimate parent of the group and reporting obligations.
Delegation of reporting: The obligations and responsibilities associated with the process of delegating reports to TRs are clarified, particularly with regard to the obligation to provide any relevant and necessary information to the submitting entity and the need to ensure continuity of reporting and avoid duplicate reporting.
Reporting of lifecycle events: The event and the date in which the event takes place are described for each action type or event type that a derivative undergoes (or a position of trades), providing greater detail of the event and its correspondence between the type of action and type of event and its reporting logic.
Reporting at position level and derivatives traded on a regulated organised trading venue: Certain aspects regarding optional reporting at position level and their categories of eligible derivatives are clarified, as well as describing how reporting of derivatives traded on a regulated organised trading venue should be carried out.
Unique Transaction Identifier (UTI) generation: Practical aspects of UTI generation are explained, including responsibilities, agreements among parties, cascade of generation, procedures, ASCII sorting method and delegation.
Identification of counterparties and determining counterparty side: It establishes the use of the LEI code to identify counterparties while clarifying other aspects of its use, validation, responsibilities, and obligations, as well as the methodology to determine each counterparty’s side in a transaction.
Procedure in the case of corporate events: The procedure to follow when a counterparty undergoes a corporate event (merger, acquisition, split, etc.) affecting its LEI, including communication between the parties, with the TR, among TRs, key dates, obligations, responsibilities, delegation and reporting logic is explained.
Identification, classification and notification of products and underlying: The UPI (Unique Product Identifier) code must be used for the identification of contracts when provided in the regulations. Initially, all relevant data fields identifying the products shall also require reporting. As authorities and market participants become more familiar with the UPI system, the possibility of collecting relevant product identifier data directly from the UPI reference data library shall be considered. The same type of identification shall take place with the ISIN identifier by means of the Financial Instruments Reference Data System (FIRDS). Product classification shall be done in application of the ISO 10692 code on the Classification of Financial Instruments (CFI). It specifies the identification standards of the underlying with ISIN, code and name; as well as their identification in credit derivatives according to the typology of these contract types. Additionally, specific reporting features are detailed according to the type of derivative contract to be notified.
Reporting of specific fields: Further clarification is provided regarding how to properly report the Notional, Price, Quantity, Contract Value and Clearing fields, among others.
Margins reports: Details are provided regarding the reporting of margins, as well as specifying that, in the case of the use of the Settle-to-Market model, reporting a zero-variation margin is permitted.
Additional elements related to management and data quality: It details that, in the case of relevant problems with reporting, responsible entities should immediately notify the competent authorities, disclosing the nature and extent of the issue, as well as the corrective measures and the schedule for the corresponding resolution. Moreover, TRs must provide counterparties and competent authorities detailed information on a daily basis regarding reported derivatives, including current status, rejections, reconciliation, outdated valuations and margins, lifecycle events and abnormal notional values. It also clarifies some aspects of the reconciliation of reports, such as the terms of the contracts to be reconciled, time horizons, the date of the lifecycle event as a reference and the valuation reconciliation method.
In order to resolve any issue or doubt concerning reporting obligations, as well as to minimise the possible impact on all entities participating in the Spanish derivative markets, the CNMV provides the following contact details to send us any question, doubts or suggestions in this regard: