In the last years, the regulatory journey has gained a lot of speed and financial as well as non-financial institutions were trying their best to keep up with its pace. At the end of this year an additional layer of complexity will make this even more complicated. BREXIT, especially now that it becomes nearly certain that it will be a no-deal BREXIT, will make it even more confusing for entities in the UK and EU27 having clients, branches, or counterparties in the other jurisdiction.
Entities with a reporting obligation under multiple regulations, like EMIR, SFTR and MiFIR, face different approaches and requirements. Therefore it becomes even more complex to verify whether a transaction is reportable or not, under which regulation it is reportable and who needs to report it to whom.
Under SFTR and MiFIR trades that have been executed by a branch in the other jurisdiction require dual reporting, once to the regulator in which the head quarter is located and once to the regulator in which the branch is located. In contrary to this under EMIR the branch concept is not recognised, meaning that the trades only need to be reported to the Trade Repository approved in the jurisdiction in which the Head Quarter is located.
This means that the rules engine determining the reporting obligation needs to be different depending on the regulation and the reporting channel. If a branch of a EU27 entity located in the UK for example executes a derivative contract for which the underlying is admitted for trading on a trading venue, it needs to report under MiFIR in both jurisdictions while for EMIR the reporting must be done to an EU Trade Repository only. Taking into consideration that most regulations evolved quite significantly over time and that it can be expected that this will continue in the future, it would mean that the same transaction needs to be reported to three different reporting channels (EU ARM, UK ARM, EU TR) applying three different reporting logics and validation rules.
In addition to the different reporting requirements, also the approach regarding the entity to which you need to report your transactions is different. Under MiFIR the FCA has granted a grace period of one year to the ARMs not having a local presence in the UK, while under EMIR and SFTR TRs will have to have a local presence as of the 1st of January 2021. Not every TR will have this in place and even if they do it does not automatically mean that each TR will offer services under all regulations. Some will offer services under both regulations (EMIR & SFTR) in both jurisdictions (EU27 & UK), some will not offer their services under both jurisdictions and some will offer services in both jurisdictions but not for all regulations.
On top to the additional complexity caused by this no-deal BREXIT some important market participants wound down their reporting services or were taken over by others recently. If you are looking for a reliable intermediary that can handle your reporting flows under EMIR EU & UK, SFTR EU & UK, MiFIR EU & UK via one unified platform and in one stable reporting format to report them to different reporting channels, do not hesitate to contact us at email@example.com.