Author:
Sophia Fulugunya
Director of Transaction Reporting
6 January 2025
Navigating the Reporting of Underlying Assets Under EMIR REFIT
The rollout of EMIR REFIT has introduced several new reporting fields aimed at improving clarity and accommodating the complexities of derivatives. A significant change is the addition of the reference entity field, which requires firms to carefully assess whether to populate the underlying identification fields or the reference entity field.
Under the original EMIR framework, a single "Underlying" field was used to report ISINs, LEIs, UPIs, indices, and baskets. EMIR REFIT has now split this field, prompting firms to update their systems and processes to ensure the correct application of each field.
Reporting When You Have an LEI
For cases where the underlying is not an index or basket and does not have an ISIN, EMIR REFIT mandates the use of the reference entity field to report the relevant details, typically an LEI. This requirement is especially pertinent for credit derivatives linked to loans.
The introduction of these additional fields means firms must be able to clearly differentiate between scenarios that require the underlying instrument fields and those that require the reference entity field to maintain compliance.
Key Considerations for Firms
1. Understand Field Requirements:
A thorough understanding of when to use the underlying identification fields versus the reference entity field is essential. Errors in this differentiation can lead to non-compliance and regulatory penalties.
2. Prioritise Data Validation:
Ensure ISINs and LEIs are accurate, valid, and current. Invalid identifiers can result in rejected submissions or heightened regulatory scrutiny.
3. Strengthen Internal Processes:
Update systems, implement robust internal controls, and provide thorough training to reporting teams to adapt seamlessly to the new requirements.
Conclusion
The introduction of the reference entity field under EMIR REFIT adds complexity to derivatives reporting but also provides greater clarity for handling diverse underlying assets.
By adopting best practices and staying proactive, firms can navigate these regulatory changes effectively. At Qomply, we provide the expertise and solutions firms need to confidently manage their reporting obligations under EMIR REFIT.
