Thank you
Published: 19th April 2023
29th of April 2024 has been set as the European Union (EU) go-live date and the 18-month transition period for firms to implement EMIR Refit changes to meet their regulatory obligations has already started (almost a year away now). The FCA has issued a policy statement joint with the Bank of England including the final amendments to the Technical Standards and the new rules for Trade Repositories stating that the new United Kingdom (UK) rules will be applicable from the 30 September 2024 (and the headache continues).
Market participants have a lot to take on and consider, however in this edition we specifically analyse the changes to the Action Type fields and discuss the introduction of Event Types.
Action type is a mandatory field specifying whether a given report creates, modifies, corrects, terminates etc. a record pertaining to the trade in question. It is safe to say that updating the action types will bring another set of challenges to market participants as they will have to amend existing reporting logics to include new and remove redundant values.
Despite the updates in the Action Type field values, counterparties having the obligation to report transactions will need to ensure that the values are reported in the new 4-character format. Taking a closer look at the new values, some considerations are;
As if Action Type updates were not enough, ESMA introduced 11 Event Types aiming to increase transparency on the business event being triggered and to ensure the appropriate lifecycle events are being reported. This, by the way, brings the total number of action/event type scenarios to 34 – take note for business event mappings and reporting logic amendments!
| EVENT TYPE | |||||||||||||
| Trade | Step-In | PTRR | Early Termination | Clearing | Exercise | Allocation | Credit Event | Inclusion in Position | Corporate Event | Update | No event required | ||
|
ACTION TYPE
|
New | T | T,P | T | – | T | T | T | – | P | T,P | – | – |
| Modify | T,P | T,P | T,P | T,P | – | T,P | T | T,P | P | T,P | T,P | P | |
| Correct | – | – | – | – | – | – | – | – | – | – | – | T,P | |
| Terminate | – | T,P | T,P | T,P | T | T,P | T | T,P | T,P | T,P | – | – | |
| Error | – | – | – | – | – | – | – | – | – | – | – | T,P | |
| Revive | – | – | – | – | – | – | – | – | – | – | – | T,P | |
| Valuation | – | – | – | – | – | – | – | – | – | – | – | T,P | |
| Margin Update | – | – | – | – | – | – | – | – | – | – | – | T,P | |
| Position Component | – | – | – | – | – | – | – | – | – | – | – | P | |
Take a look at some examples for the action/event type scenarios:
Regulatory requirements can be similar across jurisdictions. CFTC Re-write is live since the 5th of December and in the changes firms had to take into consideration, included updates on Action and Event Types. For those who report to CFTC it will be easier to implement these changes for EMIR Refit as they should be able to leverage tested approaches to meet their obligations despite the divergence in the format. For those who do not report to CFTC a bit more work is required.
| EMIR Event Type | CFTC Event Type |
| TRAD = Trade | TRDE = Trade |
| NOVA = Step-in | NOVT = Novation |
| COMP = PTRR | COMP = Compression or Risk Reduction |
| ETRM = Early termination | EART = Early termination |
| CLRG = Clearing | CLRG = Clearing |
| EXER = Exercise | EXER = Exercise |
| ALOC = Allocation | ALOC = Allocation |
| CREV = Credit event | CRDT = Credit event |
| CORP = Corporate Event | PORT = Transfer |
| INCP = Inclusion in position | CLAL = Clearing & Allocation |
| UPDT = Update |
Introducing event types will surely bring another set of challenges which will require a significant amount of time and effort to implement – think more of sweat and tears. Here’s the key things to consider;
As you can see there is lots of complexity just on Action Type and Event Type and not a lot of time to do it with resources and budgets being pulled in different directions. This is just one aspect of the EMIR Refit to be considered. There are others that will be just as challenging, which we will cover next time.
If you need help, First Derivative can help you get it done. Contact us today.
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Katerina Saba |
