The UK’s Emir Refit Is Finally Here – Is Your Firm Ready?

Benjamin Parker, eflow Global, Ceo

Ben Parker, CEO and founder at eflow Global

The long-awaited EMIR Refit regulation has now come into force in the UK. The EU’s deadline came and went in April this year, and now it’s the turn of UK businesses to adhere to the updated regulations – with the added benefit of having had five more months to prepare.

The updates to EMIR have introduced sweeping modifications to the way derivatives are +reported to trade repositories (TRs), including how they are formatted and the number of data fields that need to be submitted. Adapting to the complexity of these changes has required firms to radically reassess their processes and technology.

EMIR Refit in the UK largely mirrors the EU version, helping to provide some consistency with reporting on the continent, but there are also some key differences. For firms operating in both jurisdictions, this can be both a blessing and a curse depending on the tools being used.

While the changes are significant and would have required extensive planning, updating and testing of reporting systems beforehand, firms will need to adapt to the new regulations quickly; companies will need to fine-tune their EMIR reporting system and processes for accuracy and efficiency during the six month transition period, which ends on 31 March 2025.

For many firms, the introduction of EMIR Refit may have left them realising that their current systems and processes are not robust enough to deal with the significant increase in the volume and complexity of data that they now need to report. If this is the case, then they must act quickly to implement appropriate processes to ensure that they aren’t the subject of enforcement action and the hefty fines and reputational damage that comes with it.

So, what are some of the changes? And how can firms ensure they adhere to them?

What firms need to do

By now, companies should have thoroughly assessed their reporting processes and made the necessary changes ahead of the deadline. Firms operating in both the EU and UK should be well and truly adjusted to the new regulations, having already had to adhere to the EU rules since 29 April 2024. This means they should be well placed to adapt existing working processes in line with the UK EMIR Refit – on the face of it, this should be an easier transition. However, operating across both jurisdictions can also create more complications.

Differences between the Financial Conduct Authority (FCA) and the European Securities and Markets Authority (ESMA) can mean that validation rules for fields vary between the two jurisdictions. If a firm’s transaction reporting technology is not able to automatically adjust fields to UK and EU rules from one trade to another trade, then a lot of manual work is needed to carry out the process. These firms may also be using two different solutions for each region, creating a lack of coherence and increasing compliance costs.

What EMIR refit really necessitates is sophisticated and accurate record keeping – something a one dimensional compliance system is unlikely to provide in the long run. If they haven’t done so already, firms should be looking to adopt a holistic solution that is capable of providing specialised EMIR Refit-compliant reporting – systems that can join up reporting processes across the company while also adapting to changing regulatory demands, both in the EU and the UK.

Why delegated reporting isn’t enough

Many firms will have considered, and possibly selected, the option of delegated reporting as part of their plans to comply with EMIR Refit. While this approach might seem like an easier solution, it doesn’t eliminate the core responsibility firms have for the accuracy and quality of their data. In fact, many firms relying on counterparties to manage their transaction reporting are discovering that this approach may not be enough to meet the stringent demands of regulators.

According to a consultation paper by ESMA, 30-40% of firms using delegated reporting have raised concerns about the reliability of the data submitted on their behalf. This lack of confidence has led businesses to seek greater control, either by turning to external vendors or exploring in-house solutions to ensure the quality of their data.

Moreover, as technology automation continues to advance, more firms are shifting towards third-party solutions that enhance their reporting processes. A 2023 survey by RegTech Insight found that 47% of financial institutions have either adopted or are considering automated solutions for EMIR and MiFIR reporting, up from 30% just two years prior.

These systems integrate data enrichment, validation, and automation to provide more reliable reporting, allowing firms to swiftly identify and resolve discrepancies. In an environment where the cost of errors can be significant, this level of control and transparency is becoming essential for maintaining compliance and peace of mind.

By embracing technology, firms are moving beyond delegated reporting and streamlining their reporting processes to ensure they remain compliant with evolving regulatory requirements.

Keeping apace with change

Technology allows firms to claw back time. For trades entered into before 30 September 2024, the FCA has said there is “six-month transition period for entities responsible for reporting to update those outstanding derivative reports to the new requirements”. The implementation of a robust EMIR reporting system can tackle this backlog efficiently while also facilitating current and new trades.

However, EMIR Refit is not just tweaking how derivatives are reported to trade repositories – it is delivering considerable changes to the process that underpins it. It takes time to embed new reporting systems into a firm’s day-to-day operations and align employees to new processes. It also requires a commitment from senior management to invest in compliance.

Rather than view the new regulations as another regulatory challenge, firms should see EMIR Refit as an opportunity to strengthen their regulatory processes while also driving operational efficiencies that will help their business to scale. Employees should also be trained on the importance of accurate reporting and how the use of technology will ultimately make their lives easier in the long run.

Even if companies have introduced updates to legacy systems, the pace and scale of Refit changes means that they are likely to require a more agile and modern approach for the future. With more updates coming into play as part of EMIR Refit – Phase 2 in 2026, taking a long-term view is likely to help firms put sound foundations in place. If implemented successfully, this should make future transitions a significantly easier challenge to navigate.