EMIR Reporting and meeting the oversight requirements under the European Market Infrastructure Regulation (EMIR) remains a significant operational and regulatory challenge for in-scope entities. An important, yet challenging, aspect of the requirements involves monitoring data quality, specifically performing assessments of significance of identified errors and omissions (E&Os) and submitting regulatory notifications when thresholds are breached. Additionally, report submitting entities (RSEs) may need to provide data to entities responsible for reporting (ERRs) to facilitate assessments of significance. The requirements are well prescribed within the ESMA Guidelines for Reporting, namely Sections 3.29 and 6.3, which detail the processes for ensuring data quality and handling E&Os. 

In this blog, Alpha FMC and Reg-X explore these requirements, the key challenges facing in-scope entities, and how solutions like Reg-X’s RegAssure platform are optimising the way in which firms oversee EMIR Reporting and enhance their approach to emir reporting, ensuring compliance and operational efficiency.

Understanding Assessments of Significance and Errors & Omissions under EMIR

Importance of Accurate Emir Reporting

EU EMIR mandates responsible entities maintain high data quality to support systemic risk monitoring. Section 3.29 of the ESMA Guidelines emphasizes the importance of identifying and correcting misreporting or omissions to avoid duplication and ensure compliance with Article 9(1e) of EMIR. 

Key requirements include:

• Threshold Checking for Significant Issues:
  • Counterparties must assess the significance of misreporting or omissions monthly, focusing on three categories:
    • Category 1: Reports with action types like ‘New’, ‘Modify’, ‘Correct’, ‘Terminate’, ‘Error’, ‘Revive’, or ‘Position component’.
    • Category 2: Reports with action type ‘Valuation’.
    • Category 3: Reports with action type ‘Margin update’.

• Significance of misreporting then needs to be compared with the threshold specified by ESMA.

• If the threshold is breached in any category, the ERR must notify the relevant National Competent Authority (NCA).

• • Errors and Omissions Notification:
    • Under Article 9(1) of the ITS on Reporting, counterparties must notify NCAs of:
      • Misreporting due to system flaws affecting a significant number of reports (Article 9(1)(a)).
      • Reporting obstacles preventing timely submission (Article 9(1)(b)).
      • Significant issues not causing rejection by TRs (Article 9(1)(c)), such as:
        • Incorrect assessment of reportability.
        • Inconsistent interpretation of report fields or number of reports.
        • Errors in key fields like counterparty IDs, trade details, amounts, currencies, or dates.
    • Notifications must include:
      • Identification of the ERR and RSE.
      • Scope and type of errors or omissions.
      • Reasons for the issue and steps for resolution.
      • Timeline for correction.

• A common template on ESMA’s website should be used for submissions, with separate notifications for distinct issues unless closely related.

UK EMIR, while less prescriptive than EU EMIR, still requires ERRs to assess the materiality of any errors or omissions in their reporting. This assessment should take into account the size, nature, and complexity of the business. In practice, we are seeing many firms apply similar threshold calculations under both regimes, despite the absence of explicit requirements under UK EMIR. This reflects a broader trend towards aligning internal reporting standards across jurisdictions.

Challenges in EMIR E&O Compliance

Complying with EMIR’s E&O requirements, particularly in the EU, presents several challenges:

• Volume and Complexity: ERRs handling thousands to millions of reports monthly must efficiently identify errors and omissions, and assess their significance across multiple categories
• Timely Detection: Rapid identification of issues within the T+1 reporting deadline is critical to avoid penalties
• Data Provision: RSEs undertaking delegated reporting on behalf of ERRs must provide the necessary data to their counterparts to facilitate the assessment of significance. Not only does this encourage secure data management, but as the number of counterparts grows, the data provisioning process becomes more onerous and prone to errors
• Significance Calibration: Calculating significance thresholds based on historical submission data requires robust analytics to ensure accuracy
• Notification Management: Preparing and submitting E&O notifications to NCAs in a standardised format can be resource-intensive
• Data Reconciliation: Ensuring consistency across dual-sided reporting and resolving mismatches adds complexity

These challenges encourage the adoption of advanced technological solutions to automate data quality checks, significance calculations, and notification processes.

How Reg-X’s RegAssure Solves E&O Challenges

Reg-X’s RegAssure platform is designed to address these challenges through its comprehensive E&O analytics solution, tailored to EMIR compliance. Here’s how RegAssure streamlines the process:

• Automated Significance Checking:
  • Significance Calculation: Calculating the average monthly submissions (AverageMonthNum) and applying ESMA’s calibration constants to determine if thresholds are breached. For example, for an entity with 500,000 monthly submissions, a significant issue would be identified if the number of affected reports exceeds max(20,000, 15% of 500,000 = 75,000)
  • Scenario Analysis: Handling of complex scenarios, such as those in Tables 24-26 of the Guidelines, ensuring accurate assessment at the ERR or RSE level
  • Data Provisioning: Establishing a one-stop-shop for counterparties to self-serve their data via a secure and easy-to-use client portal, facilitating the efficient sharing of data required to perform significance calculations by responsible entities. This includes notifying clients and making available all trades reported on their behalf (for delegated reporting models)

• Automated Notification Generation:
  • Standardised Templates: Generating E&O notifications using ESMA’s common template, including all required details such as the scope of affected reports, root causes, and resolution timelines.
  • Timely Submission: Ensuring notifications are sent to NCAs without undue delay, as mandated by Article 9(1), reducing manual effort and compliance risk.

• Data Quality Feedback Integration:
  • Rejection and Warning Feedback: Processing TR feedback (immediate and end-of-day) on rejections, missing valuations, and abnormal values, enabling rapid corrective action.
  • Integration of Assurance: Where assurance testing is undertaken separately (e.g. in-house or via an alternative outsourced provider), the results can be easily overlayed to determine the assessment of significance

About Alpha FMC

Alpha FMC is the leading consultancy to the global buy-side, with over 1,000 consultants and a client-base containing all of the top 20 asset managers by AuM, and 80% of the top 100.

We’ve helped our clients reimagine regulatory reporting: streamlining oversight, driving down errors, and delivering complex remediation at scale. In doing so, we’ve uncovered persistent pain points, from manual errors & omissions processes to inefficient data-provisioning with counterparties.

That’s why we’re excited to collaborate with Reg-X on RegAssure — a powerful, automated platform designed to fix these gaps, simplify oversight, restore control over the reporting and oversight process.

About Reg-X Innovations

In a landscape of constantly shifting regulation, Reg-X Innovations brings clarity and control to regulatory reporting.

Our platform brings together three core solutions, RegAssure, RegData and Periodic Reporting, to support reporting, assurance and record-keeping from a single, intuitive interface. Reg-X is the only global solution that fully integrates reporting, assurance and back-reporting across major regimes, including EMIR, MiFID II, REMIT and CFTC.

With innovative solutions for error and omission analytics, accuracy testing, completeness reconciliation and instant back-reporting, our technology goes beyond basic compliance to offer a more comprehensive approach.

Our team supports firms through onboarding, ongoing regulatory changes and the adoption of best practice. The platform itself is built on a flexible, cost-efficient architecture that speeds up implementation and reduces the need for internal builds.

Reg-X is also the only solution offering regulatory-compliant record-keeping across global jurisdictions.

Trusted by compliance teams worldwide, Reg-X delivers a seamless and expert-led experience from start to finish.