EMIR notifications and exemptions - Financial Conduct Authority

EMIR notifications and exemptions

Published: 14/09/2015     Last Modified: 18/05/2016
The main notifications and applications under EMIR fall into the following categories summarised below. More details are available from the relevant articles in the EMIR regulation and related technical standards, which are available from the EMIR Library.

Firms should consider in advance whether they will need to make notifications or apply for an exemption.

EMIR Intragroup exemptions from Margin

The regulatory technical standards on risk-mitigation techniques for OTC derivative contracts not cleared by a CCP under Article 11 of EMIR (the “Draft Margin RTS”) will soon be finalised and come into force. The Draft Margin RTS detail the requirements for firms to exchange margins on non-centrally cleared OTC derivatives. Under EMIR there is an exemption from the requirement to exchange margin for intragroup transactions provided certain criteria have been met.

We currently receive applications from firms via the EMIR Web Portal for intragroup exemptions from the clearing obligation under EMIR. Our plan was to extend this web portal to allow us also to receive applications for the margin intragroup exemption. However, following further investigation it has become clear that it would not have been possible to achieve this without incurring disproportionate costs.

As a result, we have produced an application form that will be available on this page in due course pending finalisation of the Draft Margin RTS. We will ask firms to apply by completing this form and sending it to us by email along with the relevant supporting documentation (please see further detail under the Future notifications section below). In the meantime, a draft version of the application form is now available via the link below to give firms an idea of the questions that will be asked and allow firms more time to prepare their applications. This draft form is intended only as a guide to the information firms will be expected to provide when applying for IGT margin exemptions. The final form is likely to be different, reflecting any refinements to FCA processes for reviewing applications and any changes which may be made to the margin RTS before they are adopted.

Margin Intragroup Exemption Application Form

Counterparties should use the EMIR web portal to electronically submit notifications for disputes (article 15(2) of the OTC derivative technical standards); the intragroup exemption from the clearing obligation (article 4(2) EMIR); and non-financial counterparties exceeding the clearing threshold (article 10(1) EMIR). Submissions for the intragroup exemption from the clearing obligation are only being accepted for transactions between two entities in the same group which are both established in the UK at this time.

To submit these notifications, counterparties must be registered to use the portal. You will need to create at least one super user who must give us the following information:

  • full name of the notifying counterparty
  • FCA Firm Reference Number (if applicable) and Legal Entity Identifier
  • registered address and postcode of the notifying counterparty; and
  • contact details for the first super-user (name, email and telephone number).

Each counterparty can only be registered on the web portal once. The first person to register a counterparty will be a ‘super user’ for the account and will be able to create new users to act on behalf of the counterparty as necessary.

Once the counterparty has been successfully registered, the super user must activate their account via a URL link which we will send by email. Once the account has been activated the super-user must create a new password and can then make notifications on behalf of the counterparty. Before submitting any notifications, the super user will need to add the details of at least one person of appropriate seniority who will be responsible for declaring any submitted notifications. To add a person of appropriate seniority the super user must provide this person’s name, position and contact details.

Once registered to an account a super user will also be able to add additional counterparties. This will allow them to make notifications from one account on behalf of multiple counterparties. To submit a notification for any counterparty within an account you must have also assigned at least one person of appropriate seniority to that counterparty.

Need help? Our user guide for the web portal is available and our Q&As may help when using the portal. 

Active notifications

Please read the following section for information on the notifications and applications under EMIR which are currently active. If you have questions which are not answered here then please contact the EMIR team by email.

Since 15 September 2013, financial counterparties have been required to  report any disputes between counterparties about an OTC derivative contract, its valuation or the exchange of collateral for an amount or a higher value than EUR 15 million and outstanding for at least 15 business days (article 15(2) EMIR).

When to report a dispute: The FCA requires financial counterparties to ensure that by the 15th of each month any disputes outstanding in the previous month have been reported. Any disputes reported in the previous month still open should be updated by the 15th of each month; you do not need to submit a new report each month. A nil return is not required if there are no disputes to report in any particular month.

How to report a dispute: financial counterparties must be registered on the FCA EMIR web portal and fill in the correct notification to provide the following information:

  • name of the other counterparty to the dispute, plus their Legal Entity Identifier (if available) and their country of establishment
  • details of the dispute: amount in €m and the basis on which it has been calculated (trade-by-trade, or portfolio)* along with an identifying code, if available
  • and the date the dispute was identified and when resolved (if and when it is resolved)

* The amount or value of outstanding disputes should be calculated and reported on a trade-by-trade basis whenever possible. However, you may use a portfolio basis if the disputed valuation or collateral, for example initial margin, is calculated at the portfolio level.

Under some circumstances (set out in Article 4 of EMIR and Commission Delegated Regulation (EU) 2015/2205 and/or Commission Delegated Regulation (EU) 2016/592 with regard to regulatory technical standards on the clearing obligation (the “Clearing RTS”)), your firm may be exempt from the clearing obligation. For instance:

  • If your firm is a UK counterparty who wants to be exempt from the clearing obligation in relation to OTC derivative transactions with another EU entity belonging to your group, you must apply to us (article 4(2)(a) of EMIR).
  • If your firm is a UK counterparty who wants to be exempt from the clearing obligation in relation to OTC derivative transactions with another entity belonging to your group and established in a third country in respect of which the European Commission has adopted an equivalence decision under Article 13 of EMIR, you must apply to us (article 4(2)(b) of EMIR).
  • If your firm is a UK counterparty who wants to benefit from a derogation from the clearing obligation in relation to OTC derivative transactions with another entity belonging to your group and established in a third country in respect of which the European Commission has not adopted an equivalence decision under Article 13 of EMIR, you must apply to us (article 3(2) of the Clearing RTS).

We are currently accepting applications for all of the above exemptions and derogations.

In accordance with ESMA EMIR Q&A (OTC Question 6(g)), please note that where counterparties are established in two different EU member states and the relevant national competent authorities disagree on whether the relevant conditions are met, counterparties should not rely on the exemption.

How to apply

Your firm must be registered on the FCA EMIR web portal and you must fill in the correct application, including the following information:

  • name of your intragroup counterparty, plus your Legal Entity Identifier and country of establishment
  • a summary description demonstrating that both counterparties are included in the same consolidation on a full basis, either in line with relevant accounting standards or through consolidated supervision, in line with EMIR article 3(3)
  • a summary description demonstrating that both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures

In relation to applications for a derogation from the clearing obligation in respect of transactions between a UK counterparty and a third country entity in respect of which the European Commission hasn’t adopted an equivalence decision:

  • your firm should use the option on the EMIR Web Portal which is the closest to your circumstances (ignoring references to the Commission having adopted an implementing act under Article 13(2) in respect of that third country)
  • your firm is only required to apply to us once in order to benefit from the derogation under all relevant Clearing RTS
  • any such derogation is time-limited and will expire in accordance with article 3(2) of the relevant Clearing RTS (after which counterparties will need to reapply pursuant to Article 4(2)(b) of EMIR once the Commission has adopted an equivalence decision under Article 13 of EMIR)

For more information on what to include in an application, please visit our EMIR Portal Q&A pages.

What happens next – the review process and timetable

We have 30 calendar days to consider any of the above applications. Within the 30 day period, we will email you to confirm whether you can use the exemption (subject to the decision of the other relevant EU NCA in the case of intragroup transactions between a UK counterparty and an intragroup counterparty established in another EU member state).

EMIR provides for the obligation of counterparties to clear over-the-counter (OTC) derivative contracts that have been declared subject to the clearing obligation. Under Article 89 of EMIR, some pension scheme arrangements may benefit from a temporary exemption (currently to 16 August 2017) from the clearing obligation for their OTC derivative contracts that are objectively measurable as reducing investment risks directly related to their financial solvency.

Pursuant to Article 89(2) of EMIR, listed below are types of pension scheme entities and arrangements which have been granted an exemption from the clearing obligation. This follows, and takes into account, the publication of opinions by the European Securities and Markets Authority (ESMA), which in turn reflect ESMA’s consultation with the European Insurance and Occupational Pensions Authority (EIOPA).

The entities and arrangements below have been assessed by the FCA as complying with Article 2(10)c or d of EMIR, and as encountering difficulties in meeting the variation margin requirements. The list does not include pension scheme arrangements under Article 2(10)a and b of EMIR, which automatically qualify for the temporary clearing exemption.

Before using an exemption, pension scheme arrangements and entities must carry out a self-assessment to ensure compliance with one of the approved types listed below, as well as the relevant criteria set out in EMIR. Such assessments should be properly documented, made available to the competent authority upon request, and reviewed on an ongoing basis to ensure they are updated to reflect any changes in circumstances. Pension scheme arrangements and entities should, in addition to notifying their counterparties of the eligibility of the transaction for a clearing exemption under EMIR, also notify their counterparties of any changes to their exemption status.

See a list of pension scheme arrangements which benefit from a temporary exemption from the clearing obligation (pursuant to Article 89(1) of EMIR).

Since 15 March 2013 a non-financial counterparty that enters into positions in over-the-counter (OTC) derivatives contracts that exceed the clearing thresholds specified by ESMA under article 11 of the OTC derivative technical standards must notify its competent authority under Article 10(1) of EMIR.

Non-financial counterparties established in the UK must notify the FCA if they have exceeded, or are subsequently no longer exceeding, the clearing threshold. Further information on the procedure for notification and calculation of the clearing threshold and the obligations for non-financial counterparties.

How to submit a notification: Non-financials exceeding (or no longer exceeding) the clearing threshold must register on the FCA EMIR web portal to submit a clearing threshold notification. These notifications must be submitted by a person with appropriate seniority, for example; an executive director, company secretary, or head of compliance.

Non-financials who submitted notifications for exceeding (and no longer exceeding) the clearing threshold using a previous system who subsequently go under or over the threshold again may need to re-submit their notifications. If you have any questions please contact the EMIR team for further information.

Financial counterparties must have procedures in place to report on a monthly basis the number of unconfirmed OTC derivative transactions that have been outstanding for more than five business days. This requirement is derived from article 12(4) of the OTC derivative technical standards.

Financial counterparties will be contacted individually to request that a report is submitted. Financial counterparties do not need to submit a report unless it has been requested, but must have procedures in place to do so when requested.

Future notifications

Under some circumstances (set out in Article 11 of EMIR and, subject to their finalisation, regulatory technical standards on risk-mitigation techniques for OTC derivative contracts not cleared by a CCP under Article 11 of EMIR (the “Draft Margin RTS”)), your firm may be exempt from the obligation to exchange margin in respect of non-centrally cleared OTC derivatives with other group entities. For instance:

  • If your firm is a UK counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another UK counterparty belonging to your group, no formal application is required. You should therefore satisfy yourself that you meet the relevant conditions (Article 11(5) of EMIR).
  • If your firm is a UK financial counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another EU financial counterparty belonging to your group, you must apply to us for an exemption (Article 11(6) EMIR).
  • If your firm is a UK non-financial counterparty who wants to be exempt from the margin obligation in relation to OTC derivative transactions with another EU non-financial counterparty belonging to your group, you must apply to us for an exemption (Article 11(7) EMIR).
  • If your firm is a UK non-financial counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with an EU financial counterparty belonging to your group, no formal application is required by the UK non-financial counterparty (Article 11(10) EMIR). A notification of this exemption will be provided to us by the NCA of the EU financial counterparty.
  • If your firm is a UK counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another counterparty belonging to your group established in a third country in respect of which the European Commission has adopted an equivalence decision, you must apply to us (Article 11 (8) and (9) EMIR).
  • Subject to finalisation of the Draft Margin RTS, if your firm is a UK counterparty who wants to benefit from a derogation from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another counterparty belonging to your group established in a third country in respect of which the European Commission has not adopted an equivalence decision, you must apply to us (Article 39 of the Draft Margin RTS).
  • Subject to finalisation of the Draft Margin RTS, such  derogation will be time-limited and expire in accordance with Article 39 of the Draft Margin RTS (after which counterparties will need to reapply pursuant to Article 11(8) or (9) of EMIR once the Commission has adopted an equivalence decision).

Please note that where counterparties are established in two different EU member states and the relevant national competent authorities disagree on whether the relevant conditions are met, counterparties should not rely on the exemption.

Pending finalisation of the Draft Margin RTS, we are not currently accepting applications for any of the above exemptions and derogations from the margin obligation.

How to apply

  1. We have produced a draft Margin Intragroup Exemption Application Form. A final application form in Excel format will be available in due course pending finalisation of the Draft Margin RTS.
  2. This form must be submitted by a person of appropriate seniority within the applying counterparty, for example an executive director, company secretary, or head compliance officer. That person should have verified that all of the information in the form is accurate
  3. You will need to provide supporting documentation to your application. Please save and name any supporting documentation using the following naming convention
    Sender_FileType_Recipient_Sequence Number_Year
  4. Once the form has been completed, please email your application and the supporting documentation to MarginIGT@fca.org.uk using the following naming convention for the email subject title:
    Applicant Counterparty Name_Intragroup Counterparty Name

What happens next – the review process and timetable

We have three months to consider any of the above applications. Within the three month period, we will email you to confirm whether you can use the exemption (subject to the decision of the other relevant EU NCA in the case of intragroup transactions between a UK counterparty and an intragroup counterparty established in another EU member state).