The European Market Infrastructure Regulation (EMIR) has evolved since its development in 2012. The transaction reporting requirements improve the oversight and monitoring of derivatives markets. It aims to allow the authorities to keep track of market activities and identify possible risks to the financial system. Market participants are now preparing for changes to these reporting requirements set to take effect in April 2024, including changes in the reporting format to ISO20022 XML standards, increased reporting fields and the addition of the new Unique Product Identifiers (UPI). Preparing for these changes can be difficult, particularly when it comes to direct reporting or counterparty delegation.
Counterparty delegation occurs when one entity delegates its transaction reporting obligation to another party while retaining its legal responsibility for compliance. It can be a practical solution for firms with limited resources or expertise. However, the practice introduces complexity and potential compliance pitfalls, like issues relating to accountability and oversight, data quality and consistency, and regulatory changes and updates.
Before the April 2024 deadline, firms must assess their reporting capabilities and whether their current reporting model fits their needs. This assessment should include ensuring counterparties have a robust reporting infrastructure and transparent communication. It’s important for the firms to ensure the proper resources and processes are in place, as failure to comply with the EMIR transaction reporting may result in financial penalties, reputational risk, operational disruptions, increased regulatory scrutiny, loss of market access and remediation costs.
Many firms will likely explore various solutions to navigating the compliance challenges. Large firms may choose to build up their in-house reporting expertise, but this requires a heavy investment in talent and technology. One option is to seek a collaborative partnership with a third-party service provider specializing in EMIR transaction reporting. Some third-party service providers offer reporting solutions to integrate with a firm’s existing infrastructure.
Challenges shouldn’t be the only consideration while preparing for the EMIR changes. Partnering with SS&C for EMIR Reporting can enable firms to achieve several benefits.
- Efficiency and cost savings – Reducing reporting burdens allows firms to focus on their core business activities.
- Expertise and best practices – Leveraging the expertise of service providers leads to better reporting accuracy and reliability, as well as adoption of industry best practices.
- Scalability – Scalable reporting capabilities allow more agility in responding to changes in requirements.
- Reduced compliance risk – Proactively complying with regulatory changes reduces risk.
- Innovation and technology – The innovative reporting and technology solutions offered by many third-party service providers streamline processes and improve data quality.
SS&C is here to help you navigate the ever-changing regulatory landscape. Our integrated solutions and technical resources can help you comply with current and upcoming regulations while reducing processing costs.
Download our "Unpacking EMIR Reporting Changes and Counterparty Delegation: The Compliance Conundrum" whitepaper to learn more about addressing the challenges of complying with the upcoming EMIR changes and how SS&C can help.