Mitigating Risk

What’s Your Brexit Strategy? Make Sure You’re on Track with Our Trade Reporting Checklist

By Chris Childs, DTCC Managing Director, R&DS, CEO & President DTCC Deriv/SERV LLC | Oct 27, 2020

What’s Your Brexit Strategy? Make Sure You’re on Track with Our Trade Reporting Checklist
Chris Childs, DTCC Managing Director, R&DS, CEO & President DTCC Deriv/SERV LLC.

2020 has been a year filled with the unexpected. As firms navigate record market volatility and adapt to new ways of working and delivering value, they’re now being forced to turn their attention to another historic challenge: Brexit.

The effects of the UK’s split with the European Union will be felt not only by firms, but their clients, too. Fully understanding the changes – and the steps you can take to prepare for them – is key to reducing the impact this transition will have on your operating models. This includes trade reporting.

As you’re probably aware, the UK left the European Union on January 31, 2020 and entered the transition period, which is scheduled to end on December 31, 2020 at 11 p.m. GMT. As we’ve been reminding clients, the reporting obligation for UK European Market Infrastructure Regulation (UK-EMIR) and UK Securities Financing Transaction Regulation (UK-SFTR) will come into force at that time.

DTCC will offer end-to-end trade reporting solutions in both the UK and EU post-transition. After December 31, 2020, firms using DTCC’s Global Trade Repository service (GTR) to report to the European Securities Markets Authority (ESMA) for EMIR or SFTR compliance will need to be onboarded and be ready to report to DTCC Data Repository (Ireland) PLC (DDRIE, our EU27 trade repository in Ireland). In order to report to the Financial Conduct Authority (FCA) for EMIR and SFTR post-transition, clients will need to be onboarded to DTCC Derivatives Repository PLC (DDRL, our UK trade repository).

How We Can Help

Preparing for a smooth and successful Brexit transition may mean enhancing your infrastructure, updating some of your business processes and/or making other improvements to your post-trade processing. DTCC Consulting Services, our new advisory offering, can assess the issues your firm should address to be Brexit-ready. Our consulting team then can provide tailored guidance and recommendations designed to lower the risks and costs of meeting your regulatory requirements in the post-transition environment.

Our Brexit checklist is another non-exhaustive tool to aid your preparations for the transition. This to-do list can help you assess the list of tasks your firm may need to undertake in preparation for Brexit, as you adapt to the new environment.


Brexit Checklist


Eligibility

  • Determine the reporting eligibility of your entities and any entities you report on behalf of Onboarding
  • Onboard your organization and all relevant entities to the trade repositories they’ll report to post-Brexit
  • If you onboarded prior to the previous Brexit deadlines, confirm your setup is up to date and accurately reflects any changes to entity structure that may have occurred in the interim

Delegated Reporting

  • Determine whether Brexit impacts your offering or usage of a delegated reporting service

Mandatory Delegated Reporting

  • Track whether Brexit will change your mandatory delegation requirements under EMIR
  • Track whether Brexit will change your mandatory delegation requirements under SFTR (For example, the FCA does not require SFTR reporting by NFC firms post-Brexit)

Explicit Permissions

  • Ensure your Explicit Permissions to report for other entities under UK EMIR & SFTR are in place
  • Determine whether these Explicit Permissions vary for ongoing FCA and ESMA reporting

Connectivity

  • Establish and test the ability to send/direct submissions to different trade repositories
  • Establish and test the ability to consume responses and reports separately from UK and/or EU trade repositories

Inter/Intra Trade Repository Reconciliations

  • Assess the impact of splitting EMIR & SFTR trade repository reconciliations into separate UK & EU reconciliations
    • If applicable, assess the impact of cross-jurisdictional reporting on your internal reconciliation controls

Controls Framework

  • Gauge the impact on any of your “over reporting” and “under reporting” controls
  • Consider potential impacts to your data quality controls and monitoring

Data Feeds & Reference Data

  • Assess impacts on your data feeds and reference data sources CRDE/CRD Data

CRDE/CRD Data

  • Update the data held in DTCC’s Counterparty Reference Data and Enrichment Service (CRDE) or Counterparty Reference Data (CRD) utilities as needed

Operational Impact

  • Review impacts on your workflows and exceptions tracking processes
  • Delegate FCA and ESMA reporting to the same or separate teams as appropriate

Unique Trade Identifier (UTI) Generation & Consumption

  • Gauge impacts on your workflows for generating, disseminating and consuming UTI’s

Divergence of Rules & Schemas

  • Prepare for potential divergence between FCA & ESMA rules over time
  • Prepare for potential divergence between ISO20022 schemas over time

Vendors & Middleware

  • Monitor impacts on services or integrations with market vendors or middleware

As the go-live of Brexit-era trade reporting rapidly approaches, DTCC is here to support you in managing this regulatory change -- through our dedicated client forums, user-acceptance testing (UAT) meetings, Consulting Services, our ample client learning resources, and our relationship managers available to answer your questions. Please reach out to one of our experts today to learn how we can help: contact us.

Please visit dtcc.com/brexit for more information on how DTCC is helping our clients prepare for Brexit.

 

 

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