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What is EMIR?
In 2009 the G20 pledged to undertake reforms aimed at increasing transparency and reducing systemic counterparty risk in the over-the-counter (OTC) derivatives market. The European market infrastructure regulation (EMIR) implements most of these pledged reforms in the European Union (EU). EMIR covers OTC derivatives, central clearing counterparties (CCPs) and trade repositories (TRs). EMIR entered into force on 16 August 2012 with the first obligations relating to TRs and CCPs coming into force in March 2013. The final key requirements are due to come into force in the second half of 2015 with some provisions being phased in until 2020.
KEY EMIR REQUIREMENTS
WHICH ENTITIES DOES EMIR APPLY TO?
EMIR applies to entities established in the EU entering into derivatives contracts, and in some cases indirectly to non-EU entities trading with EU parties (although non-EU counterparties will not have to report to a TR). There are two main categories of counterparty to a derivatives contract:
KEY EMIR REQUIREMENTS CURRENTLY IN FORCE
From March 2013 — notification requirements:
From early 2014, the first EU CCP authorisations began to take place following which the process of identifying derivatives cleared by authorised or recognised CCPs has been continuing since. ESMA has since analysed several derivative classes including interest rates, credit, equity and FX OTC derivatives and has proposed some of them for the clearing obligation.
12 February 2014 — the reporting start date for all derivative classes came into force.
13 July 2015 — ESMA published an updated list of CCPs which are authorised under EMIR and its Public Register for the Clearing Obligation.
6 August 2015 — the Commission adopted a delegated regulation that makes it mandatory for certain OTC interest rate derivatives to be cleared through CCPs.
UPCOMING EMIR REQUIREMENTS
31 October 2015 — ESMA expects TRs to implement the validation rules as set out in their revised EMIR Q&A on Level 2 validation for trade reporting.
Q3/4 2015 — First clearing obligations likely, but will be subject to phasing-in. Further RTS expected from ESMA; these have been postponed in the light of ongoing global development of international standards.
1 December 2015 — RTS on risk-mitigation techniques for OTC derivatives contracts not cleared by a CCP under EMIR to come into force (subject to a four-year transitional period).
December 2015 — Anticipated date for variation margin requirements to come into effect. Initial Margin Requirements with a threshold of up to €50m expected to be phased in between 1 December 2015 and 1 December 2019.
1 September 2016 — In March 2015 the Basel Committee on Banking and IOSCO released a revision to the implementation schedule for margin requirements for non-centrally cleared derivatives. A delay of nine months was agreed. This has pushed the start of the phase-in period for posting and collecting margin from 1 December 2015 to 1 September 2016.
1 December 2019 — End of four-year transitional period for RTS on risk-mitigation techniques for OTC derivatives contracts not cleared by a CCP under EMIR.
31 December 2020 — End of the transition period for implementing the margin requirements for non-centrally cleared derivatives (as set out by the Basel Committee on Banking and IOSCO).
CHECK YOUR COMPLIANCE WITH EMIR
FCs and NFCs should assess their compliance with EMIR and future obligations. Below are some questions to think about:
This blog post was written by Melanie Ball PSL lawyer in the Financial Services team.
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