Adhering to EMIR reporting for derivatives markets

In brief:

• EMIR Refit expands reportable data fields, creating stricter reconciliation demands and consequently operational challenges for financial and non-financial counterparties..
• Reconciliation challenges and data quality issues remain the primary obstacles, with surveys showing 69% of firms anticipating serious difficulties building matching and exception management capabilities.
• Automated reporting platforms and blockchain verification systems are becoming essential infrastructure for meeting EMIR regulation reporting requirements.

EMIR’s foundation and recent enhancements

The European Market Infrastructure Regulation (EMIR) established its framework in 2012, implementing G20 reforms designed to bring transparency to derivatives markets following the 2008 financial crisis. The regulation mandates central clearing for over-the-counter (OTC) derivatives and requires comprehensive reporting of all derivatives transactions to registered trade repositories.

Spotlight on the 2024 EMIR Refit updates

The 2024 EMIR Refit amendments represent the first substantive divergence between EU EMIR and UK EMIR reporting regimes. The 2024 EMIR Refit updates aim to harmonize derivatives reporting globally and create a transparent derivatives trading environment.

The recent reporting format changes are significant. Reporting entities must now ensure all reports submitted to trade repositories comply with the standardized ISO 20022 XML template. Plus, the number of reportable fields has increased from 129 to 203 for EU reporting, while UK reporting now requires 204 fields.

Fundamental EMIR obligations for derivatives participants

Trade reporting requirements

All counterparties involved in derivatives transactions must report details of any derivative contract they have concluded, modified, or terminated. This obligation extends to both financial counterparties and non-financial counterparties (NFC), covering:

• Over-the-counter derivatives (including cleared derivatives)
• Exchange-traded derivatives
• Futures, options, swaps, forward rate agreements
• Commodity derivatives settled physically or in cash

Reports must be submitted to a registered trade repository no later than one working day after the trade has been made (known as T+1). This tight timeline demands efficient reporting systems and processes to meet trade repository obligations.

Reconciliation and portfolio compression under EMIR for participants

Portfolio reconciliation requirements vary based on counterparty classification and the number of outstanding contracts. The frequency ranges from:

Counterparty Type	Outstanding Contracts	Reconciliation Frequency
Financial Counterparty	500+	Daily
Financial Counterparty	51-500	Weekly
Financial Counterparty	50 or less	Quarterly
NFC	100+	Quarterly
NFC	100 or less	Yearly

Addressing EMIR reconciliation challenges in derivatives involves understanding the new requirements, since new trade repository verification and reconciliation processes took effect with EMIR Refit. This requires counterparties, the entity responsible for reporting, and the report submitting entity to ensure feedback on reconciliation issues is received and acted upon.

Portfolio compression becomes mandatory for counterparties with 500 or more uncleared OTC derivatives with a single counterparty. These entities must review and consider portfolio compression at least twice yearly to reduce operational risks and capital requirements.

Delegated reporting and thresholds

For relationships subject to mandatory reporting, EU NFCs below the clearing threshold dealing with EU financial counterparties require the financial counterparty to report on their behalf, though each party retains legal responsibility for its own reporting.

The best methods for EMIR delegated reporting involve choosing the right delegation model, establishing clear contractual arrangements, implementing robust data sharing protocols, maintaining verification rights, having internal oversight, and leveraging the right technology platforms.

Implementation timelines and transition periods

The phased implementation created specific deadlines:

EU EMIR regulation timeline:

• April 29, 2024: New reporting standards go live
• October 26, 2024: Deadline to update outstanding derivatives

UK EMIR regulation timeline:

• September 30, 2024: New reporting standards go live
• March 31, 2025: Deadline to update outstanding derivatives

Complexities in EMIR fulfillment and optimization methods

Many derivatives firms find themselves mired in multiple layers of challenges when it comes to EMIR regulation compliance. Some of the headline pain points hampering derivatives compliance include:

1. Data harmonization challenges: Changes to data fields, the availability of basic data and questionable data quality, together with a lack of historical records for the newly required metrics. Data completeness is essential in today’s tightly regulated securities markets. 
2. Cross-border variances: Distinct differences between EU EMIR and UK EMIR create operational headaches for firms operating across both jurisdictions, requiring dual systems or flexible platforms capable of handling jurisdiction-specific requirements.
3. Reconciliation discrepancies: An Acuiti survey of 40 sell-side firms found that 69% were expecting serious challenges when building up their matching, reconciliation, and exception management capabilities. Next-gen cloud archiving and AI-enabled discovery contribute towards overcoming this challenge.
4. Lack of expertise and infrastructure: Resource constraints has emerged as a critical issue, with firms facing significant difficulties amassing the expertise and infrastructure to meet EMIR Refit challenges. Working with a single vendor can mitigate data governance risks, build the right tools for a solid EU market infrastructure, and facilitate training of personnel.

While ESMA’s published implementation Q&A document helps clarify some of the uncertainties, many counterparties are still unsure of their reporting obligations.

Procedural outlines for an optimized approach to EMIR reporting

1. Conduct data gap analysis: Identify which of the 203 reportable fields your systems capture and document collection gaps.
2. Implement validation routines: Establish automated pre-submission checks to achieve the European Securities and Markets Authority’s (ESMA) expected “close to zero” rejection rate.
3. Establish exception management: Build infrastructure to identify and correct errors within the seven-business-day window through automated handling.
4. Develop reconciliation infrastructure: Implement three-way reconciliation across front-office data, reporting data, and trade repository records.
5. Engage third-party providers: Consider delegated reporting services or specialized platforms.
6. Test extensively: Ensure submission capability before go-live dates.
7. Monitor continuously: Track rejection rates, late submissions, and reconciliation breaks.

Digital aids for EMIR conformance

Powerful digital tools for EMIR compliance in markets have emerged that are streamlining EMIR compliance efforts.

            1. Reporting software and data aggregation

Modern EMIR compliance increasingly depends on specialized technology platforms. These systems handle the complexity of ISO 20022 XML formatting, field population, validation rules, and submission protocols that manual processes cannot manage at scale.

Key capabilities include:

• Automated field population from multiple internal and external data sources.
• Real-time validation against ESMA and Financial Conduct Authority validation rules before submission.
• Unique transaction identifier (UTI) generation following prescribed methodologies.
• Entity responsible for reporting (ERR) management with automated identification.
• Trade repository connectivity supporting multiple repositories across jurisdictions.

The move to ISO 20022 submissions using XML format required an 18-month implementation period rather than the usual 12 months due to its complexity. While this creates technical challenges, the standardized format enables easier porting between trade repositories and creates a more level playing field.

            2. Blockchain for verification

In addition to reporting software, distributed ledger technology offers promising solutions for reconciliation challenges. Blockchain-based systems can create immutable audit trails, enable real-time data sharing between counterparties, and automate reconciliation through smart contracts that flag discrepancies immediately.

These systems provide particular value for cross-border transactions where traditional reconciliation faces jurisdictional ambiguities. The shared ledger ensures both parties work from identical data, reducing disputes and accelerating resolution when discrepancies arise.

            3. Manual versus tech-driven workflows

The scale of EMIR Refit makes manual spreadsheet-based approaches obsolete, because of the practical requirements, which include:

• 203 fields per trade requiring population and validation
• T+1 submission deadlines with zero tolerance for delays
• Continuous reconciliation at frequencies ranging from daily to yearly
• Historical trade updates requiring systematic review and resubmission
• Cross-jurisdictional compliance with varying field requirements

Manual processes simply cannot maintain accuracy and timeliness at this scale. Firms need approaches that prevent errors by testing data completeness and validity as standard operating process, and when errors occur, have the ability to address them within strong change management and audit control environments, correcting within minutes rather than months.

Integration benefits and audit-ready systems

The most effective platforms integrate EMIR reporting with broader derivatives management systems. This integration creates tangible value for counterparties with reporting obligations, most notably:

• Single source of truth eliminating duplicate data entry and reconciliation issues
• Automated lifecycle event tracking ensuring modifications trigger appropriate reporting
• Collateral management integration supporting accurate valuation and margin reporting
• Risk analytics connectivity enabling firms to use reported data for portfolio monitoring

Importantly, audit-ready systems maintain comprehensive documentation demonstrating compliance. This includes:

• Complete audit trails showing data lineage from source systems through transformations to submission
• Version control documenting all corrections and resubmissions with timestamps and justifications
• Reconciliation records proving regular portfolio reconciliation occurred at required frequencies
• Notification archives storing copies of error notifications sent to competent authorities

Final thoughts

EMIR’s evolution through Refit demonstrates regulators’ commitment to transparency and standardization in derivatives markets. The EMIR regulation framework creates accountability, reduces systemic risk, and enables authorities to monitor market activities effectively.

While implementation challenges are real, the result is a more stable, transparent derivatives trading environment that contributes towards a trusted EU market infrastructure.

Successful EMIR reporting strategies for EU trading firms in 2025 involve viewing EMIR compliance as part of comprehensive derivatives management infrastructure. To thrive under the new requirements, counterparties must invest in robust data systems, establish clear governance, engage proactively with service providers, and embrace technology platforms capable of handling the regulation’s complexity.

Global Relay offers comprehensive data solutions designed for EMIR alignment, creating audit-ready records that demonstrate compliance while streamlining your reporting workflows. Explore Global Relay’s solutions to learn how we can support your adherence to derivatives reporting obligations across EU and UK jurisdictions.

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