NO DEAL BREXIT AND TRANSACTION REPORTIING

March 13, 2019

The FCA have published guidance for transaction reporting in the case of a no deal Brexit. We have summarised thee requirements here;

Summary;

  • Obligations – As per current EMIR – EUWA (EU Withdrawal Act) means obligations the same but now in UK law instead of EU law
  • “We expect firms and market participants to continue to apply non-legislative materials (such as ESMA Q&As and guidelines) as they did before Exit day”
  • UK Firms must report to a UK registered TR

Boundary Cases;

  • UK branches of third-country firms are not in scope of the UK EMIR reporting regime and so do not have to report under the onshored UK regime.
  • Third-country (after Brexit, including EU27) branches of UK established firms are in scope of the UK EMIR reporting regime and must report details of their derivative transactions to an FCA-registered, or recognised, TR.
  • Where a non-UK AIF is managed by an Alternative Investment Fund Manager (AIFM) that is registered under the onshored UK Alternative Investment Fund Managers Directive (UK AIFMD), it will be reclassified as a Financial Counterparty for the purposes of the UK EMIR regime and in scope of the reporting requirements.
  • These trades will not be in scope of the UK EMIR reporting regime:
    • Derivative transactions entered into by 2 EU27 counterparties that are traded on a UK Trading Venue.
    • Derivative transactions entered into by 2 EU27 counterparties denominated in GBP.
    • Derivative transactions entered into by 2 EU27 counterparties where the reference entity of the derivative contract is located in the UK or where the reference obligation is UK sovereign debt.

Go live;

  • All new derivative trades entered into by UK counterparties on or after 11.00pm on 29 March 2019 are in scope of the UK EMIR reporting regime and are required to be reported to an FCA-registered, or recognised, TR.
  • All outstanding derivative trades entered into by UK counterparties on or after 16 August 2012, need to be held in an FCA-registered, or recognised, TR on 29 March 2019.

Inter-TR reconciliation

  • We recognise the importance of inter-TR reconciliation in enhancing data quality. However, we will not require UK TRs to undertake inter-TR reconciliation, or provide inter-TR reconciliation statistics to UK authorities, from Exit day. After Brexit we will work with all UK TRs on ways in which we fulfil this requirement in future.

EMIR REFIT

  • EMIR REFIT looks to amend certain EMIR reporting requirements, reducing the burden of reporting for certain counterparties.
  • The Treasury have indicated their intention to bring in these changes either under the EUWA or via the Draft Financial Services (Implementation of Legislation) Bill (link is external) (depending on when EMIR REFIT comes into force in the EU). This would enable the UK to implement the EMIR REFIT amendments as they are being implemented in the EU.
  • Firms are encouraged to keep abreast of developments both in the EU and the UK as EMIR REFIT is finalised to ensure compliance with the amendments to the reporting requirements.

https://www.fca.org.uk/news/statements/fca-statement-reporting-derivatives-under-uk-emir-regime-no-deal-scenario