AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

EMIR

The European Markets Infrastructure Regulation (EMIR) entered into force on 16 August 2012, however, many of obligations arose later, once EMIR ‘Level 2' measures became effective. These include:

  • Non-financial counterparty clearing threshold notifications: Non-financial counterparty must notify its competent authority as to whether it exceeds or subsequently falls below the relevant clearing threshold
  • Timely confirmation: A counterparty (financial counterparties and non-financial counterparties) must confirm details of its non-centrally cleared OTC derivatives transactions within a specific timeframe. Timeframes are dependent on the type of counterparty, the type of transaction and the date of execution;
  • Portfolio reconciliation: A counterparty must have in place formalised processes to reconcile its portfolios with respect to its non-centrally cleared OTC derivatives positions. The frequency of portfolio reconciliation depends on the status of the counterparty and the number of OTC derivatives contracts.
  • Portfolio compression: A counterparty with 500 or more non-centrally cleared OTC derivative contracts outstanding with a counterparty must have in place procedures to regularly, and at least twice a year, analyse the possibility of conducting a portfolio compression exercise to reduce its counterparty credit risk.
  • Dispute resolution: A counterparty must have in place formalised processes for the timely identification, recording, monitoring and resolution of disputes non-centrally cleared OTC derivative contracts. Furthermore, a financial counterparty must report disputes relating to a non-centrally cleared OTC derivative contract, its valuation or the exchange of collateral for an amount or a value higher than EUR 15 million and outstanding for at least 15 business days, to its competent authority.
  • Reporting:
    • A counterparty entering into a derivatives transaction (OTC or exchange traded) is required to report the details of such transaction to a registered trade repository (TR) on a T+1 basis.
    • A counterparty that entered into a derivatives contract on or after 16 August 2012 which was still outstanding on the reporting start date was required to report the details of such contract to a TR by 12 February 2014.
    • A counterparty who has entered into a derivatives contract before 16 August 2012 which was outstanding on the reporting start date, is required to report the details of such contract to a TR by 13 May 2014.
    • A financial counterparty or qualifying non-financial counterparty is required to report the mark-to-market (or mark-to-model (if appropriate)) value of a derivatives contract and information on such contracts collateral (for only) to a TR by 12 August 2014.
    • A counterparty who entered into a derivatives contract before 16 August 2012 which is not outstanding on the reporting start date, is required to report the details of such contract to a TR by 12 February 2017.

The list of TRs can be found here.

  • Application of EMIR to OTC derivatives contracts between third-country entities: From 10 October 2014, clearing and risk mitigation requirements will apply to OTC derivatives contracts between two third-country entities where each entity benefits from a qualifying guarantee from an EU financial counterparty or where authorities deem such  contract as having been designed with the primary purpose of circumventing EMIR.

 

The following level 2 measures are currently outstanding:

  • Margin requirements for non-cleared derivative transactions: The consultation process in relation to the Level 2 measures has commenced with comments due 14 July 2014. Final Level 2 measures are expected to enter into effect by Q4 2015.
  • Clearing obligation: The timing with respect to the mandatory clearing obligation depends on the authorisation by ESMA of particular CCPs to clear certain contracts (for latest list of authorised CCPs, see below). The list of authorised CCPs can be found here (see ‘Central Counterparties authorised to offer services and activities in the Union’).
  • Third country equivalence: EMIR has in place a mechanism to avoid duplicative or conflicting rules with respect to equivalent third country regulatory regimes.  This is dependent on the adoption of implementing acts by the European Commission (EC) which determine that a third country regime is equivalent. ESMA has provided its advice to the EC, however, the EC’s adoption of such advice is outstanding.

 

Members should be aware that ESMA produces ‘EMIR Questions and Answers’ which seek to clarify interpretive issues arising with respect to EMIR (in respect of the primary text and its Level 2 measures). The latest version can be found here.

 


Key legislative documents

Level I

Regulation (EU) No.648/2012 on OTC derivatives, CCPs and trade repositories (July 2012)

Level II

Regulatory Technical Standards

Delegated Regulation (EU) No 285/2014 regulatory technical standards on direct, substantial and forseeable effect of contracts within the Union and to prevent the evasion of rules and obligations (March 2014)

Delegated Regulation (EU) No.148/2013 Regulatory technical standards on the minimum details of the data to be reported to trade repositories (February 2013)

Delegated Regulation (EU) No.149/2013 Regulatory technical standards on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, risk mitigation techniques for OTC derivatives contracts not cleared by a CCP (February 2013)

Delegated Regulation (EU) No.150/2013 Regulatory technical standards specifying the details of the application for registration as a trade repository February 2013)

Delegated Regulation (EU) No.151/2013 Regulatory technical standards specifying the data to be published and made available by trade repositories and operational standards for aggregating, comparing and accessing the data (February 2013)

Delegated Regulation (EU) No.152/2013 Regulatory technical standards on capital requirements for central counterparties (February 2013)

Delegated Regulation (EU) No.153/2013 Regulatory technical standards on requirements for central counterparties (February 2013)

Implementing Technical Standards

Implementing Regulation (EU) No.1247/2012 implementing technical standards on the format and frequency of trade reports to trade repositories (December 2012)

Implementing Regulation (EU) No.1248/2012 laying down implementing technical standards on the format of applications for registration of trade repositories (Decemebr 2012)

Implementing Regulation (EU) No.1249/2012 laying down implementing technical standards with regard to the format of the records to be maintained by central counterparties (December 2012)

 


Guidance

ESMA Questions and Answers on EMIR (June 2014)

ESMA Questions and Answers on EMIR (May 2014)

ESMA Questions and Answers on EMIR (March 2014) 

ESMA Questions and Answers on EMIR (February 2014)

ESMA Questions and Answers on EMIR (November 2013)

ESMA Questions and Answers on EMIR Implementation (updated August 2013)

ESMA Questions and Answers on EMIR Implementation (June 2013)

ESMA Questions and Answers on EMIR (March 2013)

European Commission FAQs on EMIR (February 2013)


Equivalence Assessments

ESMA technical advice

Commission Implementing acts (tbc)


Consultations, legislative process and related AIMA documents

Level 1

Level 2


Member State implementation

UK


Other AIMA documents

AIMA submission - EMIR Q&As (September 2013)

AIMA submission - EU/US dialogue on cross-border regulation of OTC derivatives (August 2013)

Response - EMIR Reporting Start Dates (July 2013)

Addressing overlaps between EMIR and CFTC OTC derivatives regulation (May 2013)

AIMA-MFA Joint Letter to ESMA on EMIR FAQs (March 2013)

Update Note - EMIR (February 2012)

EMIR Update Note (October 2011)

EMIR Update Note (6 July 2011)

EMIR Update Note (4 July 2011)

Position Paper (December 2010)

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