As the regulatory landscape continues to evolve, firms subject to EMIR and UK EMIR reporting obligations must remain vigilant in their compliance efforts. Two key trends are shaping the near future: the introduction of stricter XML schema requirements and regulators’ increasing reliance on advanced analytics to assess data quality. At the same time, divergence between ESMA and the FCA persists, particularly regarding error and omission thresholds.
Strict XML Schema to Go Live on 31 March 2025
ESMA has confirmed that the strict XML schema will become mandatory for EMIR reporting as of 31 March 2025. This update aims to ensure that all submissions conform precisely to the defined technical standards, reducing the risk of formatting errors and inconsistencies.
For Point Nine clients, this change will have no operational impact, as Point Nine already enforces strict XML schema compliance and robust validation processes. Our system ensures that all reports meet the highest quality standards before submission, mitigating the risk of rejections or inaccuracies.
ESMA’s Shift to AI and Machine Learning for Data Quality Control
A significant shift is on the horizon as ESMA plans to introduce advanced AI-driven validation for transaction reports. These new methodologies will include:
- Machine Learning Algorithms: Detecting anomalies, patterns, and potential misreporting issues based on historical data.
- Statistical Methods: Using standard deviation, minimum, and maximum values to assess data integrity and detect outliers.
- Automated Quality Indicators: Enhancing the monitoring of reporting consistency, completeness, and accuracy.
ESMA’s increasing reliance on artificial intelligence signals a move towards proactive data monitoring, where firms could face inquiries or audits based on algorithmic detections rather than traditional regulatory reviews.
At Point Nine, our custom pre-validation checks already incorporate many advanced data quality assurance measures. This proactive approach minimizes the risk of regulatory scrutiny by ensuring that our clients’ reports adhere to both technical and logical accuracy standards.
ESMA’s Growing Obsession with Data Quality
Over the past few years, ESMA has steadily escalated its focus on data quality indicators, emphasizing complete, accurate, and timely reporting. Regulators are now scrutinizing reporting firms more closely than ever, particularly for repeated errors or inconsistencies.
Point Nine has long anticipated this shift and integrates custom pre-validations to identify and rectify potential issues before submission. By maintaining rigorous data integrity controls, our clients can confidently meet these escalating quality expectations.
FCA’s Silence on Error and Omission Thresholds
While ESMA is aggressively tightening its reporting requirements, the FCA appears to be taking a more passive approach regarding error and omission thresholds. Despite expectations that the FCA would release guidelines similar to ESMA’s, there has been no clear indication that such thresholds will be introduced in the UK EMIR framework anytime soon.
This regulatory divergence could create operational challenges for firms reporting under both EMIR and UK EMIR. Without FCA guidance, firms must establish their own internal thresholds to manage reporting errors effectively.
Conclusion: Proactive Compliance is Key
The upcoming regulatory changes highlight the need for firms to be proactive in their reporting practices. As ESMA increases its reliance on AI-driven quality checks and statistical methods, and as XML schema rules become stricter, firms that fail to pre-validate their data risk increased scrutiny and potential regulatory action.
Point Nine remains ahead of these developments, ensuring that our clients are fully prepared and compliant with both current and future regulatory requirements. Our advanced pre-validation checks, strict XML schema enforcement, and commitment to data quality position us as a trusted partner in the evolving trade and transaction reporting landscape.
Contact us today for more information on how Point Nine can support your regulatory reporting needs.
