Why are we consulting?
The derivatives data reported under Article 9 of the UK European Market Infrastructure Regulation (UK EMIR) provides transparency to us and the Financial Conduct Authority (FCA) of the UK derivatives market for systemic risk and financial stability monitoring purposes. It is important the data to which we have access is complete, accurate, reported consistently and on time to ensure we can fulfil our financial stability objectives and to promote the safety and soundness of regulated firms.
We are consulting jointly with the FCA on guidance to support implementation of the amended UK EMIR reporting requirements that will go-live on 30 September 2024. The draft guidance is in the form of Questions and Answers (Q&As), grouped into relevant topics.
Draft Q&As
The draft Q&As we are consulting on have been informed by discussions with trade associations, reporting counterparties, trade repositories (TRs) and central counterparties (CCPs) via the UK EMIR Reporting Industry Engagement Group. This group, co-chaired by us and the FCA, provides a forum for discussing UK EMIR reporting issues with industry to ensure consistent reporting.
In developing these Q&As, the Bank of England (the Bank) has considered its objective to protect and enhance the financial stability of the UK, its secondary objective to facilitate innovation in the provision of FMI services and other statutory obligations.
The Q&As are divided up into the following topics:
1. Transitional Arrangements
2. Reconciliations
3. Errors and Omissions
4. Derivative Identifiers
5. Action and Events
6. Venues
7. Exchange Traded Derivatives
8. Margin and Collateral
9. Clearing
10. Position Level Reporting
11. Asset Class and Product Specific
Our first consultation, covering topics 1 to 5, was finalised on 2 May 2024, In this second consultation, we are covering topics 6 to 11, as well as any additional questions which have arisen under the earlier topics.
In certain circumstances, the draft Q&As also require a corresponding change to the UK EMIR Validation Rules (applicable from 30 September 2024). As a result, we are also consulting on those changes, and we indicate within the relevant Q&A where such a change is proposed. We do not generally consult on Validation Rules. On this occasion however, and on an exceptional basis, we invite participants to provide any feedback.
Consultation outcome
This second consultation closed on 12 June 2024.
We received 11 responses from a diverse group of participants including TRs, trade associations, central counterparties, reporters and consultants. Similar to the feedback from the first consultation, respondents were generally supportive of our approach and the proposed guidance. Consequently, we have maintained the overall approach consulted on.
Several respondents requested further clarification on certain aspects, identified where a different approach could be adopted, highlighted incorrect references, or suggested further changes to the Validation Rules as a result of the proposed guidance.
Consequently, we have made changes to Q&As 4.10, 4.12, 6.5, 6.6, 6.7, 6.8, 7.5, 8.2, 8.3, 8.6; 8.11, 9.2, 9.4, 10.1, 10.2, 10.5, 10.7 and 11.5.
In considering our response, we have been mindful of the approaching implementation date and have therefore only made changes to the schema and validation rules to address errors or to close gaps which would have affected the ability of reporting counterparties to report accurate details of derivative contracts. We do not intend to make any further changes to the schema or validation rules ahead of 30 September 2024.
There are three Q&As where we adopted a different approach:
- We removed the part of the guidance in Q&A 6.7 indicating that derivatives resulting from clearing should be reported with the original execution timestamp as feedback highlighted that derivatives resulting from clearing receive their own UTI and associated execution timestamp.
- We changed our approach for Q&A 6.8 as respondents said that new derivatives resulting from post-trade risk reduction (PTRR) events are treated as new trades. As such, it would be confusing for such trades to retain the venue of execution of the preceding trades.
- In relation to Q&A 10.7, respondents suggested the Option Premium Amount field (Table 2, Item 141) should be populated with ‘0’ when reporting at position level, rather than with the total amount paid by the option buyer for the derivatives making up the position. We adopted this suggestion as we agree with respondents the original approach would not provide meaningful data.
We received some feedback suggesting making changes contrary to the Standards Instrument, which therefore, cannot be accepted because it would contravene the legislation. Additionally, we received feedback on some issues that were out of scope of this consultation. These have not been addressed in the guidance, but we may consider addressing them post-implementation. The one exception to this relates to the reporting of spread bets, where we and the FCA are undertaking a short consultation.
We have therefore finalised this second part of the UK EMIR Reporting Q&As (applicable from 30 September 2024), as it supports the Bank’s financial stability objective. The draft UK EMIR Reporting Q&As below is retained here for transparency.
Draft UK EMIR Reporting Q&As (applicable from 30 September 2024) - Part two