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Start of EMIR “Level II validations”

Today sees the start of “Level II” validations under EMIR. This sees a “tightening” of the values that may be sent as part of an EMIR trade report to a trade repository. The changes can be found here. Each of the six approved Trade Repositories (TR) will have now implemented the changes, which include some major items as well as many minor ones.

The major items include rules such as the requirement to switch to a new Unique Trade Identifier(UTI) following the reporting of an error. This applies even if the counterparty has reported the error. So for example if a market participant has a trade agreed and submitted with the counterparty and the counterparty then reports an error, both parties must re submit a report, with a new UTI. There will be quite a bit of synchronisation to perform around this.

Other changes include stricter requirements on when to report an ISIN code, as well as new mandatory fields. Some of these changes have caused issues for those reporting certain energy and commodity trades, where deriving the appropriate data is not always possible.

The validations have been put in place to improve data quality, in particular to increase the “match rate” between counterparties’ records, that has been very low in the past, even after last year’s “Level I” validations. The limitation with both sets of validations however is that it is not possible to change the required fields without modifying the EMIR Regulatory Technical Standards (RTS)  themselves. For this reason, ESMA ran a consultation a few months ago on how to adjust the RTS to improve the quality of data. This was followed by the European Commission’s EMIR review, which will feed into a RTS change touching many other parts of EMIR.

As a result, we can expect the new RTS to be issued over the next months with resulting work on adjusting EMIR reporting on a more significant basis. This will further extend the list of requirements for regulatory data reporting, that already contains many items under REMIT phase 2 and MiFID II/MiFIR. Those who have thus far approached data reporting on a “tactical” basis may wish to move to a more flexible strategic approach sooner rather than later.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


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