EMIR Refit: Reporting Underlying Assets: Reference Entities vs Underlying Identifiers
Key Takeaways
- Field Splitting Effect: EMIR Refit's breakup of the legacy underlying field forces firms to distinguish more precisely between instrument identifiers and reference entities.
- Reference-Entity Logic: Where the underlying is not an index or basket and lacks an ISIN, the reporting obligation typically shifts to the reference-entity field.
- Credit-Derivative Relevance: The article highlights loans-linked credit derivatives as a common scenario where LEI-based reference-entity reporting becomes especially operationally important.
- Reject Risk: Misusing underlying identification fields and reference-entity fields is identified as a common cause of trade-repository rejects and reconciliation breaks.
- Implementation Priority: Firms need stronger identifier validation, system updates, and reporting-team training to apply the new field logic consistently in production.
EMIR Refit split the legacy Underlying field into distinct reporting fields. Firms must decide when to populate underlying identification fields versus the reference entity field (typically an LEI), especially for credit derivatives linked to loans. Mis-population is a common driver of TR rejects and reconciliation breaks.
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.
How Qomply can help
Qomply’s Regulatory Reporting Hub combines regulatory expertise with AI, automation and data analytics to deliver scalable, audit-ready reporting intelligence that reduces errors, lowers remediation costs, and minimises operational and regulatory risk.
Covering regimes including MiFIR, EMIR Refit, SFTR, CFTC, CSA, MAS, ASIC and HKMA, Qomply also offers a fully managed service and operates globally from London.
Frequently asked questions
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EMIR Refit split the old legacy Underlying field into distinct reporting fields. The article says firms now need to decide whether to use underlying identification fields or the reference entity field.
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They should use the reference entity field when the underlying is not an index or basket and does not have an ISIN, typically using an LEI. The article says this is especially relevant for credit derivatives linked to loans.
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It says it is a pain point because firms must clearly distinguish between scenarios that require underlying instrument fields and those that require the reference entity field. Mis-population can lead to trade repository rejects and reconciliation breaks.
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It emphasises checking that ISINs and LEIs are accurate, valid, and current. The article says invalid identifiers can trigger rejected submissions or greater regulatory scrutiny.
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They should update systems, strengthen internal controls, and train reporting teams on when each field should be used. The article says those process changes are necessary to adapt smoothly to the new reporting model.
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