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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | mayo 2020
The purpose of the EMIR Refit1 is to amend and simplify the European Markets Infrastructure Regulation2 (EMIR) “to address disproportionate compliance costs, transparency issues and insufficient access to clearing for certain counterparties.” EMIR Refit was published in the Official Journal on May 28, 2019 and entered into force on June 17, 2019. While the majority of the new requirements under the EMIR Refit applied upon the regulation entering into force, other requirements are phased in, such as the changes in relation to the current EMIR reporting regime.
The new reporting requirements will apply from June 18, 2020 onwards. In response to a letter from various industry associations requesting a period of forbearance following the June 18, 2020 effective date for the reporting requirements under EMIR Refit the European Securities and Markets Authority (ESMA) have outlined “that deprioritising supervisory actions in relation to the provisions in question is not an adequate way forward” and therefore a period of forbearance has not been granted. Market participants therefore need to continue with their implementation efforts and work towards the current June 2020 deadline.
In a previous note, we provided a summary of the key changes under the EMIR Refit. The purpose of this note is to give a short overview of the new regulatory reporting requirements under the EMIR Refit, and provide guidance on how market participants should prepare in connection with the new requirements.
Under EMIR3, all financial counterparties (FCs) and non-financial counterparties (NFCs) are required to report details of derivative contracts they have concluded (and any modification or termination of the contract) to a trade repository registered with ESMA, no later than the following business day (T+1). The reporting requirement covers both over-the-counter (OTC) derivative contracts and exchange traded derivative contracts (ETDs). Reporting can be delegated to the counterparty of the derivative contract or a third party provided there is no duplication in reporting. The type of data that needs to be reported to a trade repository depends on the regulatory status of the counterparty.
The EMIR Refit introduces the following changes:
The key deadline that firms are currently working toward is June 18, 2020.
While you may already have delegated reporting arrangements with your counterparties in place, your delegated reporting agreement will not satisfy the new regulatory reporting requirements in the event you are entering into OTC derivative transactions with NFCs which are below the relevant clearing threshold for all asset classes on or after June 18, 2020.
The Master Regulatory Reporting Agreement (MRRA) was jointly published by various industry bodies (AFME, FIA, ICMA, ISLA and ISDA). The MRRA is drafted to cover the new regulatory reporting requirements in respect of derivative transactions under EMIR (as amended by the EMIR Refit) and/or securities financing transactions under the Securities Financing Transaction Regulation (SFTR)9. The MRRA can be used for delegated reporting, mandatory reporting or both.
The answer to this will depend on a number of factors, and will not be the same for everyone, but will largely be driven by the FC`s current documentation approach. For example, in the event an FC currently has bespoke arrangements in place which form part of their general terms of business it might be easier to incorporate the new regulatory requirements into the current suite of documents. An FC might also want to consider the scope of impacted contracts and counterparties and whether or not FCs want to offer delegated reporting for OTCs and ETDs going forward.
The MRRA consists of a number of parts:
The MRRA is a template document requiring the parties to bilaterally agree and finalise various provisions throughout each section of the MRRA. FCs will therefore need to discuss with their legal, compliance and operations teams internally the relevant approach and subsequently tailor the MRRA.
In the event the new regulatory reporting requirements are applicable to you, you should consider how you wish to proceed. This includes determining:
The Financial Services team at Norton Rose Fulbright LLP has significant experience in all of the issues associated with the new regulatory reporting requirements, and can assist in your understanding of, response to or drafting of bespoke reporting documentation required to comply with the new regulatory reporting obligations introduced by the EMIR Refit and SFTR or tailoring the MRRA.
If you have any questions, please get in touch with your usual Norton Rose Fulbright contact or with any of the people listed below.
See Page 15 of the ESMA Consultation Paper on Technical standards on reporting, data quality, data access and registration of Trade Repositories under EMIR REFIT dated March 26, 2020.
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