January 25, 2021

2020 has been the year of change, including EMTs

2020 has been nothing short of eventful and full of change. But whilst we’ve all been adapting to a new way of living and working, another change has crept up on us, in less than a month – European MiFID Template (EMT) 1.0 is moving to EMT 3.0.

European MiFID Template (EMT) 1.0 is moving to EMT 3.0.

Before we dive straight into how to prepare for this, let’s take a step back and remind ourselves of what this means and why it’s important.

The European MiFID Template was designed by the financial industry in response to requirements introduced by MiFID II. It enables manufacturers of financial products to provide all necessary information to distributors in a standardised format. The first version of the EMT was drafted by the European Working Group. Today, Financial Data Exchange (FinDatEx) coordinates its maintenance and development.

On 10 December 2019, FinDatEx endorsed a third version of the EMT. While this new version builds on the existing one, it includes new sections, new fields, name and value changes to existing fields, and requirements updates, which fund companies need to be mindful of.

The deadline FinDatEx set for switching to EMT version 3 was 10 December 2020. Prior to this asset managers are expected to produce reports in both EMT 1.0 and 3.0 formats, depending on the client’s and distributor’s requests. Depending on the readiness of the market to consume the new version, it’s likely that the period of parallel production may last longer than 10 December. This duplication can impact operations, fund sales numbers, result in a greater number of errors which could lead to potential client loss, and also adds additional time pressures. For asset managers, there is no choice, if they fail to produce a report in the version and format requested by a distributor, the worst-case scenario will be that they are delisted.

Despite the deadline fast approaching, many asset managers and manufacturers are still not ready and there is a whole host of work to do. According to a recent survey we ran, a quarter of fund manufacturers plan to be ready in Q1 2021.

If not already in place, an EMT 3.0 template must be created for the equivalent scope of International Securities Identification Number (ISIN) used by EMT 1.0 and shared with the market. Alongside identifying and correcting any inaccurate and missing data, it is imperative that further conversions, for example, into Openfunds and WM data mapping, are implemented too. Compared to the EMT version 1 certain target market definitions will become invalid under 3.0 so it is important that every business understands the individual implications of this.

To make this transition smoother, here is a simple checklist of things you need to do before the deadline:

  • Do you have a copy of the endorsed EMT 3.0 specification?
  • Do you know which changes will be introduced by EMT 3.0?
  • Did you check whether all your current target market definitions will remain valid according to EMT 3.0 specification?
  • Do you know the new data points required by EMT 3.0? And have you defined these data points?
  • Are you able to produce an EMT 3.0 that is compliant with the specification in different formats (xlsx, cxv, OpenFunds, WM conversion)?
  • Are you able to disseminate for the same ISIN(s) the EMT in versions 1.0 and 3.0 in parallel?
  • Are you able to monitor versions of your EMT data produced by ISIN over time?

A key feature of the financial industry is the constant regulatory changes. Whilst this can feel like a headache, it can be easily managed as long as you have solid processes in place and an unfailing data management platform. As we start to close the door on 2020 and the myriad of changes this year has brought, it’s important to apply lessons from this year to next. 2020 has taught us that preparation is key, planning for the unknown is near on impossible but when we know that change is afoot and there is clear guidance on how to remain compliant, acting early is essential to making the transition as easy as possible.