EMIR Refit 3.0:
Third time lucky?

24^th January 2022

The title itself – EMIR Refit 3.0 – is a bit of a giveaway. EMIR regulatory requirements have become so complex that ESMA is now on take number three. The implementation process alone will unfold in two distinct phases. We’re currently in the second half of stage one (did I mention it was complicated?) ESMA’s extensive consultation paper on technical standards (running at a mere 284 pages) has been released and now awaits final approval from the European Commission (see Figure 1 below):

Figure 1

Once the European Commission endorses EMIR Refit 3.0, in Q1 2022, we will enter an 18-month implementation period – after which EMIR Refit 3.0 goes live (Figure 2 below):

Figure 2

Next up is a 6-month transition period and, after this point (early 2024?), any companies failing to comply with the new EMIR Refit 3.0 regulations could be fined. Significantly.

That might sound like a long time off, but these are inherently ambiguous guidelines, open to multiple interpretations. You’ll need to learn how to interpret these new rules clearly and concisely, and integrate them with rigour, confidence and consistency.

One of the biggest challenges will be the shift from the .CSV format to .ISO 20022 XML, in order to align with SFTR. Some companies will be planning to migrate their EMIR reporting to their SFTR solution or adding the conversion to their EMIR reporting solution. Those on third party solutions will likely have this conversion covered under the overall EMIR consultation process. Whichever process you pick, this formatting change is key.

Back reporting is also critical. With each new EMIR release, back reporting has become incrementally more challenging. ESMA has done two things to try to overcome this. First is the extension of the implementation period from 12 to 18 months. Second is the six-month transition or grace period, in which ESMA will expect all live trades to meet the new EMIR Refit 3.0 validation rules. This will require the industry to retrieve additional reporting details, which will create further operational and technical challenges of its own.

But it’s the changes to lifecycle definitions that probably best highlight the exceptional level of focus and commitment called for by EMIR Refit 3.0.

Lifecycle events will still broadly be defined by the Action Type field. But these Action Types look set to be refined and, in some instances, removed. Furthermore, there’ll be the introduction of a new Event Type field to provide an even finer level of reporting detail.

Those who have worked on Action Type regulatory changes brought in by earlier EMIR iterations will have the process etched on their memories. And not in a good way. The tweaking of Action Types and the introduction of Event Types will bring a unique set of challenges, which (like so many of the regulatory requirements) will require significant time, skill – and patience – to pull off.

If you need help, First Derivative can help you get it done. Contact us today.

Grant Haley Senior Client Partner