EMIR Refit now live in the UK with T+1 pressures following swiftly behind

Published Oct 1, 2024

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Today marks a significant milestone in the UK financial markets with the EMIR Refit officially going live. This updated regulatory framework brings enhanced transparency and reporting standards for derivatives trading across the UK. Designed to streamline and simplify compliance processes, EMIR Refit introduces crucial changes, including modifications to trade reporting obligations and clearing thresholds. Promising to improve data quality, reduce complexity and cost whilst aligning with evolving global standards and jurisdictions.

In September, several new credit ETFs were launched, marking a significant development in the fixed-income market. These exchange-traded funds, designed to track various credit indices, offer investors broader access to corporate bond markets and potentially enhanced liquidity. Proponents argue that these ETFs provide a more efficient way to gain exposure to credit markets, especially for retail investors who may find individual bond investing challenging. However, critics and regulators have expressed concerns about the potential impact on market stability. There are concerns these ETFs could exacerbate sell-offs during periods of market stress, as the underlying bonds may be less liquid than the ETFs themselves. Regulators are closely monitoring these new products to ensure they do not pose systemic risks while balancing the benefits of increased market access for investors.

Following the US, the UK financial market made a significant shift by implementing T+1 settlements, reducing the standard settlement cycle for most securities transactions from two business days (T+2) to just one (T+1). This move, aimed at enhancing market efficiency and reducing systemic risk, has been met with both enthusiasm and caution from market participants and regulators alike. Some market participants, particularly smaller firms, have expressed concerns about the compressed timeframe for trade processing and reconciliation, which could lead to increased operational pressures and potential errors. As the UK market adapts to this new settlement cycle, industry stakeholders continue to monitor its impact on trading volumes, settlement efficiency, and overall market dynamics.

What we hear from our Clients

Regulatory changes driving transformation plans: The ever-changing regulatory landscape, including recent updates to TRACE and FINRA standards, is putting pressure on financial institutions to enhance their reporting capabilities and ensure data accuracy. This push is escalating data transformation projects and fast-tracking data objectives.

Operational resilience: In light of the usual September market volatility and global events, clients are refocusing on developing robust, resilient operational infrastructures that can withstand disruptions and maintain business continuity.

Data consistency the new hot metric: For all firms, ensuring data quality and consistency across systems remains a top priority. Recently though, clients are adding new data consistency benchmarks aligned to automated data validation and reconciliation tools and processes.

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Gresham’s Prime EDM (ex. Alveo) was recognized by Data Management Insight, from A-Team Group at the annual Data Management Insight Awards USA 2024

Still not ready for EMIR Refit? Find out how Gresham are helping market participants report to Trade Repositories and provide compliance oversight through this wave of regulatory change Control Cloud – Regulatory (greshamtech.com ) Regulatory Rewrites, made simple.