EMIR news

Read our archive of news relating to EMIR dating back to August 2013.

September 2018

ESMA updates EMIR Q&As on CCPs access models and reporting

On 26 September 2018, the European Securities and Markets Authority (ESMA) updated its Q&A under the European Markets Infrastructure Regulation (EMIR).

ESMA added CCP Question 23 to bring clarity around access models at European Central Counterparties (CCPs) and a new TR Question 49 to provide clarity on how reporting counterparties should report FX swap transactions.

ESMA’s draft RTS on the clearing obligation for intragroup transactions

On 27 September 2018, ESMA published its Final Report on the Clearing Obligation under EMIR, which presents a new set of draft regulatory technical standards (RTS) on the clearing obligation. The draft RTS aim to extend the derogation for certain intragroup transactions concluded with a third-country group entity.

The three Commission Delegated Regulations on the clearing obligation for interest rate derivative and credit derivative asset classes provide for a deferred date of application of the obligation of up to three years for these transactions in the absence of equivalence decisions. The current temporary exemptions expire on different dates depending on the asset class: 

  • 21 December 2018 for Commission Delegated Regulation (EU) 2015/2205 regarding interest rate derivative classes denominated in the G4 currencies
  • 9 May 2019 for Commission Delegated Regulation (EU) 2016/592 regarding credit derivative classes, and
  • 9 July 2019 for Commission Delegated Regulation (EU) 2016/1178 regarding interest rate derivative classes denominated in non-G4 currencies (NOK, PLN, SEK).

With the first date of expiration approaching and in the absence of any equivalence decisions between the EU and third countries, ESMA proposes to extend the derogation for another two years, to 21 December 2020, for all the RTS mentioned above.

August 2018

ESMA statement on clearing for pension scheme arrangements extended to include the MiFIR trading obligation

On 8 August 2018, ESMA published an amended statement, following the 3 July statement on the clearing obligation for pension scheme arrangements (PSAs) under EMIR.

In the original statement, ESMA explains that it is aware of the difficulties that PSAs will face during the timing gap between the expiry of the current EMIR clearing exemption on 16 August 2018 and the day on which EMIR Refit comes into force. ESMA has extended the statement to acknowledge the difficulties that PSAs trading certain OTC derivative contracts will also face during this time, to meet the trading obligation under Markets in Financial Instruments Regulation (MiFIR).

We support ESMA’s amended statement. As with the clearing obligation, we will not require PSAs and their counterparties to start putting processes in place to trade their OTC derivative contracts on trading venues, which they are currently exempt from under MiFIR, during such a timing gap. This approach is subject to any further statements that may be issued by ESMA or the FCA.

Updated ESMA statement (8th August)

ESMA statement (3rd July)

July 2018

ESMA updates EMIR Q&As on reporting

On 12 July 2018, the European Securities and Markets Authority (ESMA) published an update to its Q&A in relation to the reporting requirements under the European Market Infrastructure regulation (EMIR).

This update provides further clarity on the following areas:

Amendments to the existing General Q&A 1 on identification of counterparties to a derivative that confirm a portfolio manager could be a counterparty to a derivative when entering into a derivative on its own account and own behalf.

Amendments to the existing TR Q&A 40 on Legal Entity Identifier (LEI) amendments to simplify the existing process and clarify other processes TRs should follow in different scenarios where reports must be updated in relation to the LEI.

Q&A

ESMA consults on extending the derogation for EU to third-country EMIR intragroup clearing exemptions

On 11 July 2018, the European Securities and Markets Authority (ESMA) published a consultation paper on the clearing obligation under EMIR. In the Paper, ESMA proposes a draft amending Regulatory Technical Standard (RTS) regarding the treatment of intragroup transactions between EU and third country group entities. As no third-country equivalence determination has been made in relation to the EMIR intragroup clearing exemption regime, ESMA proposes to extend to December 2020 the current derogation provided for these transactions in the absence of the relevant equivalence decisions. The consultation is open until 30 August 2018.

Consultation paper

ESMA statement on clearing obligation for pension scheme arrangements

On 3 July 2018, the European Securities and Markets Authority (ESMA) published a statement on the clearing obligation for pension scheme arrangements (PSAs) under EMIR.

In its statement, ESMA explains that it is aware of the difficulties that PSAs will face during the timing gap between the expiry of the current EMIR clearing exemption on 16 August 2018 and the day on which EMIR Refit comes into force.

ESMA also set out its expectations that competent authorities would not prioritise supervisory actions in respect of the clearing obligation towards entities that are expected to be exempted again in a relatively short period of time and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in a proportionate manner.

We support ESMA’s statement. Accordingly, we will not require PSAs and their counterparties to start putting processes in place to clear derivatives for which they are currently exempt from clearing under EMIR during such timing gap. This approach is subject to any further statements that may be issued by ESMA or the FCA.

We, in any event, continue to recognise that the clearing of derivatives is a prudent risk management tool.

ESMA statement

April 2018

ESMA guidelines on position calculation for Trade Repositories

On 27 March 2018, the European Securities and Markets Authority (ESMA) published guidelines on how trade repositories (TRs) should calculate derivative positions under the European Market Infrastructure Regulation (EMIR). 

The Guidelines set out a consistent approach for the calculation of derivative positions by European TRs.There are currently eight TRs registered under EMIR.

Calculation of positions in derivatives is crucial for the assessment of systemic risks to financial stability by allowing the NCAs to have a comprehensive sight of derivatives’ exposures.

The guidelines will become applicable on 3 December 2018.

Guidelines

February 2018

European Commission equivalence decision under EMIR for derivatives transactions in the United States – Intragroup exemptions

On Friday 13 October 2017, the European Commission adopted an implementing act determining the United States to be equivalent to the European Market Infrastructure Regulation (EMIR) in terms of the legal, supervisory and enforcement arrangements for non-centrally cleared over-the-counter (OTC) derivatives transactions. In particular, the decision concludes that Commodity Futures Trading Commission (CFTC) rules on risk monitoring and mitigation for OTC derivative contracts not cleared by a central counterparty are equivalent to EMIR.

The European Commission have now confirmed to us, other NCAs and ESMA that this equivalence determination does include intragroup exemptions under Article 11(8) and 11(9) of EMIR. This means that the temporary intragroup exemptions which we granted for trades between UK and US firms technically expire on 2 March 2018, that is four months after the coming into effect of the Commission’s equivalence decision on the US. However, the positive equivalence determination also allows firms to apply for exemptions with no expiry date.

To avoid unnecessary administrative burden on firms, we have decided to adopt a streamlined process for firms wishing to apply for these new exemptions. UK firms who currently benefit from the derogation under the Margin RTS with US group entities covered by the equivalence decision must:

  • notify the FCA of the entity pairs to which the equivalence decision applies
  • confirm whether there have been any other changes to the conditions under which the original intragroup derogation was granted

European Commission equivalence decision

Notify the FCA

December 2017

Variation margin requirements under EMIR for physically settled FX forwards

On 24 November 2017, the European Supervisory Authorities (ESAs) issued a statement on the variation margin requirements under EMIR for physically settled FX forwards. They confirmed they are in the process of reviewing, and proposing amendments to, the Regulatory Technical Standards (RTS) on risk mitigation techniques for OTC derivatives not cleared by a central counterparty. The ESAs indicated that the changes will look to align the treatment of physically settled FX forwards with the supervisory guidance applicable in other jurisdictions.

We support the ESAs’ statement. They recommend competent authorities “generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in a proportionate manner”.

The amendments to the RTS should become increasingly clear over time and we would expect firms to make their plans as a result.  Although how they will be amended is not completely clear at this time, the proposals as outlined in the ESAs’ statement can be used by firms as an indication of what the amended requirements may look like. 

Accordingly, we will not require firms whose physically settled FX forwards are likely to be outside the scope of the amended requirements to continue putting processes in place to exchange variation margin. This approach is subject to any further statements that may be issued by the ESAs or the FCA.

We, in any event, continue to recognise that the exchange of variation margin is a prudent risk management tool.

ESA's statement

February 2017

Margin requirements for uncleared derivatives - video guides

The margin requirements under EMIR for over the counter (OTC) derivative contracts not cleared through a central counterparty take effect on 4 February 2017 for larger firms (those with a group average aggregate notional amount above EUR 3 trillion) and 1 March 2017 for all other firms in scope. In order to assist firms with implementation, we have produced two videos.

In the first video, we provide a more in-depth overview of the margin requirements under EMIR, giving details on implementation timing and scope and what firms need to do in order to meet the requirements.

In the second video, we provide an overview of the intragroup exemptions that are available from the margin requirements and the application process firms are expected to follow in order to benefit from this exemption.

Video: Margin requirements for uncleared OTC derivative contracts

Video: Intragroup exemptions from the margin requirements under EMIR

September 2016

Bank of England authorises ICE Clear Europe Limited as a Central Counterparty under EMIR

On 19 September 2016, the Bank of England updated its list of UK authorised central counterparties (CCPs) to include the authorisation of ICE Clear Europe Limited. ESMA also added ICE Clear Europe Ltd to its list of authorised CCPs under the European Markets Infrastructure Regulation (EMIR). 

EMIR requires CCPs to be authorised by a college of supervisors in order to offer CCP services in the European Union. Once a CCP has been authorised or recognised within the EU, EU firms can use these CCPs to fulfil their clearing obligations (the public register for the clearing obligations under EMIR is available on ESMA's website).

Bank of England’s list of UK authorised central counterparties

ESMA’s list of authorised CCPs under EMIR (PDF)

ESAs reject proposed amendments from the European Commission to technical standards on non-centrally cleared OTC derivatives

On 9 September 2016, the European Supervisory Authorities (EBA, EIOPA and ESMA ("ESAs")), published an Opinion addressed to the European Commission (EC). The Opinion expresses the views of the ESAs on the EC's proposed amendments to the final draft Regulatory Technical Standards ("RTS") on risk mitigation techniques for OTC derivatives not cleared by a central counterparty. The draft RTS were submitted by the ESAs to the EC in March. 

In particular, following the Commission's communication on 28 July 2016, expressing its intention to endorse the ESAs' final draft RTS with amendments, the ESAs' Opinion rejects some of the proposed amendments. 

The Opinion and accompanying press release can be found on the ESAs' website.

August 2016

European Commission endorses with amendments the draft regulatory technical standards on margin requirements for non-cleared derivatives

On 28 July 2016, the European Commission (EC) endorsed, with amendments, the draft regulatory technical standards (RTS) on risk-mitigation techniques for OTC derivative contracts not cleared by a CCP under Article 11 of the European Market Infrastructure Regulation (EMIR). The RTS detail the requirements for firms to exchange margins on non-centrally cleared OTC derivatives. 

This is in accordance with Article 10 of the European Supervisory Authorities (EBA, ESMA and EIOPA (ESAs)) Regulations and the ESAs have six weeks to respond to the Commission's amendments. 

A letter to the ESAs from the Commission detailing the amendments as well as the text and annex of the delegated regulation can be found on the EC’s EMIR website

July 2016

ESMA updates its EMIR Q&As

On 27 July 2016, the European Securities and Markets Authority (ESMA) updated their EMIR Q&As to include a new answer in relation to the reporting of trades cleared by a clearing house which is not a CCP under the definition of EMIR. Further details on this guidance can be found in the updated EMIR Q&As (PDF).

European Commission Publishes Delegated Regulation for the Clearing of Interest Rate Derivatives denominated in the non-G4 Currencies 

On 20 July 2016, the European Commission (EC) published the EU Commission Delegated Regulation which imposes a clearing mandate in respect of certain classes of OTC interest rate derivatives contracts denominated in non-G4 currencies (SEK, PLN and NOK). These classes are set out in the Annex to the Delegated Regulation, and include the following types of contract: 

  • Fixed to-float interest rate swaps (IRS) 
  • Forward Rate Agreements 

The rules, which enter into force on 9 August 2016, supplement the European Market Infrastructure Regulation (EMIR) and form part of the implementation of the agreement by G20 leaders in 2009 that standardised OTC derivative contracts should be cleared through central counterparties (CCPs). The rules also confirm the effective start date for the mandatory clearing of the relevant classes.

EU Commission Delegated Regulation (PDF)

European Commission deems US Designated Contract Markets (DCMs) as equivalent to EU regulated markets 

On 1 July 2016, the European Commission (EC) published the Commission Implementing Decision (EU) 2016/1073 in the Official Journal which grants equivalence to certain designated contract markets (DCMs) in the U.S. that operate under the regulatory oversight of the CFTC, in accordance with the European Markets Infrastructure Regulation (EMIR). The decision will come into force on 22 July 2016. A list of the relevant DCMs is set out in the Annex to the Commission Implementing Decision. 

This equivalence decision is particularly relevant to EMIR, as products traded on equivalent third-country markets (in this case DCMs subject to CFTC regulatory oversight) no longer fall under the OTC derivative definition under EMIR Article 2(7) and therefore are no longer subject to the EMIR obligations relevant to OTC derivatives (such as the inclusion within the calculation of the clearing threshold for non-financial counterparties).

Commission Implementing Decision (EU) 2016/1073 (PDF)

ESMA Consults on proposed central clearing delay for Category 3 firms under EMIR

On 13 July 2016, the European Securities and Markets Authority (ESMA) published a consultation paper that proposes to postpone the phase-in date for central clearing of OTC derivatives applicable to Category 3 firms under the European Market Infrastructure Regulation (EMIR). 

ESMA proposes to amend the Delegated Regulations on the clearing obligation under EMIR to postpone the phase-in date for Category 3 firms by two years.

The consultation (PDF) closes on 5 September 2016 and ESMA will look to publish a final report by the end of 2016.

European Supervisory Authorities write to European Commission on delay to EMIR margin rules for non-cleared derivatives 

On Friday 1 July 2016, the European Supervisory Authorities (ESAs) – EBA, EIOPA and ESMA – issued a joint letter to the European Commission on the timing of the adoption of the draft regulatory standards (RTS) on risk mitigation techniques for non-centrally cleared derivatives. 

In the letter, the ESAs express their concerns about the delayed calendar for the adoption of the RTS on bilateral margins and suggest that any delay should be kept as short as possible.

ESAs Joint Letter to the Commission

June 2016

ESMA grants Chicago Mercantile Exchange Inc. (CME) recognition as a third country CCP under EMIR 

On 14 June 2016, the European Securities and Markets Authority (ESMA) updated its list of recognised central counterparties (CCPs) based in third countries to include the recognition of Chicago Mercantile Exchange Inc. (CME). 

The European Markets Infrastructure Regulation (EMIR) requires third country CCPs to be recognised by ESMA in order for them to operate in the EU. CME are the first US CCP to be recognised under the regime. 

List of recognised central counterparties based in third countries (PDF)

European Commission extends QCCP Deadline 

On 8 June 2016, the European Commission (EC) implemented regulation to extend the deadline for exposures to qualifying central counterparties (QCCPs). The deadline has been extended for another 6 months until 15 December 2016. 

Regulation (PDF)

ESMA and CFTC establish an MoU on CCPs under EMIR 

On 6 June 2016, The European Securities and Markets Authority (ESMA) and the US Commodity Futures Trading Commission (CFTC) established a memorandum of understanding (MoU) under the European Markets Infrastructure Regulation (EMIR). The MoU, which is effective from 2 June 2016, established the cooperation agreements regarding CCPs that are established in the US and authorised or recognised by the CFTC and which have applied for EU recognition under EMIR.

Memorandum of Understanding

May 2016

Applications for Intragroup Exemptions from Margin Requirements for Non-Cleared Derivatives 

The regulatory technical standards (RTS) 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 our EMIR Web Page, 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. Further details are available under the Future notifications section.

In the meantime, a draft application form is now available to give firms an idea of the questions that will be asked. 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 our processes for reviewing applications and any changes which may be made to the margin RTS before they are adopted.

Draft Application Form

FCA EMIR webpage

April 2016

EU Publishes Delegated Regulation for the clearing of certain credit derivatives contracts

On 19 April 2016, the EU Commission Delegated Regulation that imposes a clearing mandate in respect of certain types of credit derivative contracts has been published in the European Union’s Official Journal. It covers the following types of contract: 

  • untranched iTraxx Index credit default swaps (Europe Main, five-year tenor, series 17 onwards, with EUR as the settlement currency)
  • untranched iTraxx Index credit default swaps (Europe Crossover, five-year tenor, series 17 onwards, with EUR as the settlement currency)

The Delegated Regulation confirms the start date for the mandatory clearing of the relevant credit derivative contracts from 9 February 2017 onwards, subject to phase-ins, as detailed in the Delegated Regulation. 

EU Commission Delegated Regulation

European Commission adopts delegated regulation on requirements for CCPs

On 21 April 2016 the European Commission adopted a delegated regulation amending the regulatory technical standards (RTS) for requirements for CCPs in relation to the Margin Period of Risk (MPoR) for client accounts. The RTS introduce the possibility for EU CCPs to reduce the MPoR from two-day to one-day for gross omnibus accounts and individual segregated accounts for exchange traded derivatives and securities.

The RTS are now subject to a period of non-objection by the European Parliament and Council of the EU.

Delegated regulation (PDF)

BCBS publishes Consultation Paper on revisions to the Basel III leverage ratio framework

On 6 April 2016, the Basel Committee on Banking Supervision (BCBS) released a consultation paper on proposed revisions to the Basel III leverage ratio framework.

This consultation proposes a set of changes to the standard released in January 2014. Of particular relevance in the context of EMIR is the discussion of the impact of the leverage ratio on client clearing. The proposed changes to the framework are an important element of the regulatory reform programme that the Basel Committee has committed to finalise by the end of 2016.

The consultation closes on 6 July 2016.

BCBS Consultation Paper

BIS press release

ESMA proposes one-day margin period of risk for CCP Clients Accounts

The European Securities and Markets Authority (ESMA) published a final report on the review of Article 26 of Commission Delegated Regulation 156/2013 with regard to regulatory technical standards (RTS) on requirements for CCPs on the time horizons for the liquidation period under EMIR.

The amended RTS detail the margin period of risk (MPOR) for CCP client accounts and reduces the MPOR from two-day to one-day for gross omnibus accounts and individual segregated accounts for exchange traded derivatives and securities.

The European Commission has three months to decide whether to endorse the RTS. If they do endorse the RTS, this will be followed by a period of non-objection by the European Parliament and Council of the EU.

Final Report (PDF)

ESMA press release

Updated ESMA EMIR Q&As

The European Securities and Markets Authority (ESMA) published an update to the EMIR Q&As in respect of the population of the clearing obligation in the reporting section.

The new Question TR 42 covers how to populate this field during the frontloading period and how long counterparties are allowed to report value 'X' for 'not available'.

ESMA EMIR Q&As (April 2016)

ESMA press release

ESMA issues amended rules for access, aggregation and comparison of data across trade repositories

On 5 April 2016, the European Securities and Markets Authority (ESMA) released a final report for an amended RTS as referred to in Article 81 of EMIR. It covers the frequency and details of the information to be made available to relevant authorities and the information to be published as well as the operational standards required in order to aggregate and compare data across repositories.

The report covers the responses received and ESMA’s consideration of them. The amendments will address some of the data issues experienced by relevant regulators when the EMIR reporting obligation came into effect and should also offer legal certainty to current and new entrants to the trade repository market.

Final Report

ESMA press release

March 2016

ESAs submit final draft regulatory technical standards on margin for non-cleared derivatives to the European Commission

On 8 March 2016, the European supervisory authorities (EBA, ESMA and EIOPA (ESAs)) submitted to the European Commission their final draft regulatory technical standards (RTS) on risk-mitigation techniques for OTC derivative contracts not cleared by a CCP under Article 11 of the European Market Infrastructure Regulation (EMIR). The RTS detail the requirements for firms to exchange margins on non-centrally cleared OTC derivatives as well as specify the criteria regarding intragroup exemptions.

The European Commission has three months to decide whether to endorse the RTS. If they do endorse the RTS, this will be followed by a period of non-objection by the European Parliament and Council of the EU.

In order to ensure a proportionate implementation, the RTS confirm that the requirements will enter into force on 1 September 2016 subject to certain phase-ins, giving firms who are subject to these requirements time to prepare for the implementation. The phase-in is as follows:

Variation margin (VM)

  • September 2016 for entities with group’s notional amount of derivatives above €3 trillion
  • March 2017 for all other entities

Initial margin (IM)

  • September 2016 for entities with group’s notional amount of derivatives above €3 trillion
  • September 2017 for those above €2.25 trillion
  • September 2018 for those above €1.5 trillion
  • September 2019 for those above €0.75 trillion
  • September 2020 for those above €8 billion

 

Delegated regulation relating to clearing of certain credit derivatives contracts

On 1 March 2016, the European Commission adopted new rules in the form of a delegated regulation that will make it mandatory for certain over-the-counter (OTC) credit default derivative contracts to be cleared through central counterparties.

The rules supplement the European Market Infrastructure Regulation (EMIR) and form part of the implementation of the agreement by G20 leaders in 2009 that standardised OTC derivative contracts should be centrally cleared through central clearing counterparties (CCPs). The delegated regulation is subject to scrutiny by the EU Parliament and Council of the EU. Once finalised, the rules will be published in the Official Journal of the EU and will enter into force on the twentieth day following publication. The clearing obligation will then be phased in over a period of three years to give extra time for smaller market participants to comply. NB: counterparties will need to refer to the definitions in the delegated regulation to establish which category they fall within. Financial counterparties in categories 1 and 2 should also note the frontloading requirements that are set out.

As noted above, the delegated regulation covers certain credit default derivatives contracts. The specific classes that are within scope are set out in the annex to the delegated regulation. As shown, the new rules will cover the following types of contracts:

  • untranched iTraxx Index credit default swaps (Europe Main, five-year tenor, series 17 onwards, with EUR as the settlement currency)
  • untranched iTraxx Index credit default swaps (Europe Crossover, five-year tenor, series 17 onwards, with EUR as the settlement currency)

 

February 2016

List of pension scheme arrangements exempted from the clearing obligation

The European Market Infrastructure Regulation (EMIR) provides for the obligation of counterparties to clear 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, we have published a list of the types of pension scheme entities and arrangements which we have 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 listed in this document have been assessed by us 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.

Common approach - US and EU CCPs

On 10 February 2016, the European Commission and the CFTC published a joint statement to announce that a common approach regarding requirements for central clearing counterparties (CCPs) in the EU and the US had been reached.

Updated ESMA EMIR Q&As

On 16 February 2016, the European Securities and Markets Authority (ESMA) published its updated EMIR Q&As. This update includes additional guidance on the following:

  • Default management of CCPs.
  • NCA access to Trade Repository data.
  • Reporting of notional in position report.
  • Frontloading.
  • Swaptions​.

 

January 2016

Our EMIR Web Portal – Intragroup Exemptions from the Clearing Obligation under EMIR for EU to 3rd Country Intragroup Entities

We are currently updating our EMIR web portal to reflect the temporary derogation wording in Article 3(2) of the Commission Delegated Regulation (EU) 2015/2205 of 6 August 2015 supplementing EMIR with regard to Regulatory Technical Standards on the Clearing Obligation. In the meantime, Firms should use the existing application form on our EMIR Web Portal.

ESMA publishes responses to the Consultation on indirect clearing under EMIR and MiFIR

On 21 December 2015, the European Securities and Markets Authority (ESMA) published the responses received to their Consultation on indirect clearing under EMIR and MiFIR.

View the responses on the ESMA website.

ESMA publishes Consultation Paper on CCP Margin Period of Risk (MPOR) for client accounts

On 14 December 2015, the European Securities and Markets Authority (ESMA) published a Consultation Paper (CP) seeking stakeholders’ views on proposed draft regulatory technical standards amending Article 26 of Delegated Regulation No 153/2013 with regard to regulatory technical standards (RTS) on requirements for central counterparties on the time horizons for the liquidation period which ESMA has drafted under EMIR. The Consultation is open until 1 February 2016.

December 2015

EU Publishes Delegated Regulation for the Clearing of Interest Rate Derivatives denominated in the G4 Currencies

On 1 December 2015, an EU Commission Delegated Regulation was published in the European Union’s Official Journal that imposes the first clearing mandate in respect of certain classes of OTC interest rate derivatives contracts denominated in the G4 currencies (EUR, GBP, USD and JPY). These classes are set out in the Annex to the Delegated Regulation, and include the following types of contract:

  • Fixed to-float interest rate swaps (IRS)
  • Basis swaps
  • Forward Rate Agreements
  • Overnight Index Swaps

The rules, which enter into force on 21 December 2015, supplement the European Market Infrastructure Regulation (EMIR) and form part of the implementation of the agreement by G20 leaders in 2009 that standardised OTC derivative contracts should be cleared through central counterparties (CCPs). The publication of the rules also confirms the effective start date for the mandatory clearing of the relevant classes. Category 1 firms have an effective start date of 21 June 2016, and Category 2 firms follow 6 months later on 21 December 2016. Category 3 and Category 4 firms have an effective start date of 21 June 2017 and 21 December 2018 respectively.

Under EMIR there is also a frontloading requirement which requires financial counterparties in Category 1 and Category 2 to clear relevant OTC interest rate derivative contracts entered into or novated on or after 21 February 2016 and 21 May 2016, respectively. The frontloading requirement sets out that these contracts must be cleared by the dates on which the clearing obligation takes effect for these two firm categories. There is no frontloading requirement for non-financials in Categories 1 and 2, nor for Category 3 and 4 firms.

November 2015

ESMA proposes central clearing for Norwegian, Polish and Swedish interest rate swaps

On 10 November 2015, in accordance with the EMIR, ESMA finalised and submitted to the European Commission for endorsement draft regulatory technical standards (RTS) for the central clearing of OTC fixed-to-float interest rate swaps and forward rate agreements denominated in Norwegian Krone (NOK), Polish Zloty (PLN) and Swedish Krona (SEK). This follows the previous endorsement by the European Commission of central clearing of certain interest rate derivatives denominated in EUR, GBP, JPY and USD, and ESMA’s submission to the European Commission of RTS in two iTraxx Index CDS.

The draft RTS sets out ESMA’s proposals in terms of the structure of the classes that are within scope, the types of counterparties covered, and the dates from which mandatory clearing (and frontloading, where applicable) will apply per category of counterparty. It also incorporates responses to the some of the feedback received during ESMA’s consultation on this asset class, including considerations of systemic risk.

The European Commission has 3 months in which to endorse the above mentioned RTS for interest rate swaps denominated in NOK, PLN and SEK. If they do endorse the RTS, this will be followed by a period of non-objection by the European Parliament and Council of the EU. Please see ESMA’s press release for more information.

European Commission adopts further CCP Equivalence decisions

On 13 November 2015, the European Commission adopted equivalence decisions for CCPs in Canada, Switzerland, South Africa, Mexico and the Republic of Korea (note that previous equivalence decisions have already been made in relation to CCPs in Australia, Singapore, Japan and Hong Kong). See the European Commission’s press release for more information.

ESMA publishes Final Report on RTS ITS on Reporting under Article 9 of EMIR

On 13 November 2015, the European Securities and Markets Authority (ESMA) updated the existing technical standards for EMIR which aims to provide further clarity around existing data fields, adapt various existing fields and introduce new fields to align to market practice. This update is a follow up from previous Q&As with some improvements to ensure consistent and harmonised data which is required when working with complex derivatives.

The European Commission has 3 months in which to approve the new RTS for data format reporting. If they do endorse the RTS, this will be followed by a period of non-objection by the European Parliament and Council of the EU. 

European Commission call for applications for European Post-Trade Forum

On 16 November 2015, the European Commission’s Communication Action Plan on Building a Capital Markets Union (CMU) September 2015 stated that “to support more efficient and resilient post-trading systems and collateral markets, the Commission will undertake a broader review on progress in removing Giovannini barriers to cross-border clearing and settlement, following the implementation of recent legislation and market infrastructure developments”. The European Post-Trade Forum is being established to assist the Commission in undertaking this review. The Commission is seeking applications to participate in the forum. More details. The closing date is 21 December 2015.

ESMA Publishes Consultation Paper on Indirect Clearing Arrangements under EMIR and MiFIR

On 5 November 2015, ESMA published a consultation paper seeking stakeholders' views on draft requirements on indirect clearing arrangements for OTC derivatives and exchange-traded derivatives (ETD).

This consultation paper covers the draft regulatory technical standards (RTS) on indirect clearing arrangements for ETD under Regulation No 600/2014 (MiFIR) as well as the draft amendments to Commission Delegated Regulation No 149/2013 with regard to the RTS on indirect clearing arrangements for OTC derivatives under Regulation No 648/2013 (EMIR). With respect to the EMIR RTS, the paper does not cover the other items that are included in the EMIR RTS.

Input from stakeholders will assist ESMA in developing a revised draft of the EMIR RTS and to finalise a draft MiFIR RTS in relation to indirect clearing arrangements. In particular, ESMA are looking for an analysis of the costs and benefits these legal provisions will imply. ESMA welcomes input in this respect along with any supportive data.

This consultation is open for public comments until 17 December 2015.

October 2015

ESMA publishes the 14th update to its EMIR Q&As – Reporting

On 1 October 2015, the European Securities and Markets Authority (ESMA) published the 14th update to its Q&As on the implementation of the European Market Infrastructure Regulation (EMIR).

This update includes guidance on the procedure to be followed by firms and trade repositories to update a counterparty’s identifier where a counterparty obtains an LEI or its LEI changes due to a merger or acquisition. See ESMA's updated Q&As for more information.

ESMA finalises draft Regulatory Technical Standards on Clearing CDS

On 2 October 2015, in accordance with EMIR, ESMA finalised and submitted to the European Commission for endorsement a draft regulatory technical standard (RTS) for the central clearing of certain types of Credit Default Swap (CDS). More specifically, Table 1 of the RTS proposes for mandatory clearing to apply to the following two iTraxx Index CDS:

  • Untranched iTraxx Index CDS (Europe Main, 5 year tenor, series 17 onwards, with EUR as the settlement currency).
  • Untranched iTraxx Index CDS (Europe Crossover, 5 year tenor, series 17 onwards, with EUR as the settlement currency).

The draft RTS sets out ESMA’s proposals in terms of the types of CDS contracts within scope (see above), the types of counterparties covered, and the dates from which mandatory clearing would apply. It also incorporates responses to the some of the feedback received during ESMA's consultation on this asset class.

ESMA’s submission follows the first RTS on Interest Rate Derivatives, which was adopted by the European Commission on 6 August 2015. The approach taken reflects that taken in the first RTS in a number of areas, such as the categorisation of counterparties, scope of frontloading and treatment of intragroup transactions.

The European Commission has 3 months to decide whether to endorse the RTS. If they do endorse the RTS, this will be followed by a period of non-objection by the European Parliament and Council of the EU.

August 2015

ESMA consultation on Article 26 of RTS 153/2013 (CCP client accounts)

On 27 August 2015, ESMA published a consultation paper on the review of Article 26 of EMIR Regulatory Technical Standards 153/2013 which deals with Central Counterparties' client accounts. It is aimed at CCPs, clearing members and counterparties accessing CCP services as clients of clearing members. ESMA is seeking stakeholder's feedback by 30 September 2015.

EMIR Review - ESMA reports to the Commission

On 13 August 2015, ESMA published four reports on how the EMIR framework has been functioning, and providing input and recommendations to the European Commission' EMIR Review. Three of the reports are required under Article 85 of EMIR, and cover non-financial counterparties, pro-cyclicality and the segregation and portability for CCPs. The fourth report responds to the European Commission's EMIR Review Consultation and includes recommendations on amending EMIR in relation to the clearing obligation, the recognition of third country CCPs and the supervision and enforcement procedures for trade repositories.

Delegated Regulation relating to clearing of interest rate derivatives denominated in the G4 currencies 

The European Commission adopted new rules in the form of a Delegated Regulation that will make it mandatory for certain over-the-counter (OTC) interest rate derivative contracts denominated in the G4 currencies (GBP, EUR, JPY and USD) to be cleared through central counterparties. 

The rules supplement the European Market Infrastructure Regulation (EMIR) and form part of the implementation of the agreement by G20 leaders in 2009 that standardised OTC derivative contracts should be centrally cleared through CCPs. Please note that the Delegated Regulation is subject to scrutiny by the EU Parliament and Council of the EU. Once finalised, the rules will be published in the Official Journal of the EU and will enter into force on the twentieth day following publication. The clearing obligations will then be phased in over a period of three years according to counterparty category (NB: counterparties will need to refer to the definitions in the Delegated Regulation to establish which category they fall within) allowing time for smaller market participants to comply. Financial counterparties in categories 1 and 2 should also note the frontloading requirements that are set out.

As noted above, the Delegated Regulation covers certain interest rate swaps denominated in the G4 currencies. The specific classes that are within scope are set out in the Annex to the Delegated Regulation, and have specific features, including the index used as a reference for the derivative, its maturity, and the notional type. 

As shown, the new rules cover the following types of contract:

  • Fixed-to-float interest rate swaps (IRS), known as 'plain vanilla' interest rate derivatives.
  • Float-to-float swaps, known as 'basis swaps'.
  • Forward Rate Agreements.
  • Overnight Index Swaps.

The Delegated Regulation is based on the proposals put forward by the European Securities and Markets Authority (ESMA). As noted in the Commission’s press release it is expected that ESMA will propose obligations for other types of OTC derivative contracts in the near future. 

July 2015

Presentation slides - EMIR: The obligation to clear and margin OTC derivative trades 

We recently held a seminar on EMIR – the obligation to clear and margin OTC derivative trades and have published the slides. 

The seminar proved to be extremely popular and we will be making further sessions available in the near future, with further details to follow.

See our EMIR library for our past presentations.

June 2015

ESAs publish Second Consultation on margin RTS for non-cleared derivatives

On 10 June 2015, the European Supervisory Authorities (ESAs) launched a second consultation on draft RTS on margin requirements for non-centrally cleared derivatives under EMIR.

This second consultation paper builds on the proposals outlined in the first Consultation Paper, published in April 2014, and prescribes the regulatory amount of initial and variation margin that counterparties should exchange as well as the methodologies for their calculations. In addition, the draft RTS outline the criteria for the eligible collateral and establish the criteria to ensure that such collateral is sufficiently diversified and not subject to wrong-way risk. This second consultation paper follows close dialogue between the ESAs (comprising the EBA, ESMA and EIOPA), relevant authorities, and industry stakeholders since the initial consultation to identify operational issues that may arise from the implementation framework and address the comments received.  As a result, feedback is sought on a narrower set of topics. The draft RTS should also provide in-scope counterparties with greater clarity as to the requirements that will be proposed to the European Commission for adoption, and should therefore assist such with preparations for implementation. The RTS reflect the amended timelines announced in March 2015 by the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO).  

The consultation runs until 10 July 2015. All contributions received will be published following the close of the consultation, unless requested otherwise. A feedback statement in respect of this and the first consultation will accompany the final draft RTS.  Finally, stakeholders should be aware that the ESAs will hold a public hearing on the draft RTSs, which will take place at the EBA premises in London on 18 June 2015 from 12:00 to 14:30 UK time.

Commission extends transitional period to December 2015 for capital requirements for banks’ exposures to CCPs

On 4 June 2015, the European Commission adopted an implementing act that will extend the transitional period from 15 June 2015 to 15 December 2015 for capital requirements for EU banking groups’ exposures to CCPs under the Capital Requirements Regulation. Read the press release.

May 2015

European Commission publishes consultation on EMIR Review

The European Commission has published a consultation asking for input on the implementation of, and first experience with, EMIR. All interested parties are encouraged to complete the questionnaire which has been provided for this purpose – comments are due by 13 August 2015. As part of the review, the Commission has also arranged for a public hearing on 29 May 2015 at the Commission's offices in Brussels.

ESMA publish consultation paper (no. 4) on clearing obligation under EMIR

ESMA has published consultation paper (No. 4) that seeks stakeholders’ views on proposed regulatory technical standards (RTS) on the clearing obligation under EMIR.

This consultation paper follows three previous consultation papers on the clearing obligation on interest rate derivative (IRD) classes, credit derivative classes, foreign-exchange non-deliverable forward (NDF) classes, as well as the publication of a final report on the clearing obligation on IRD classes and a feedback statement on NDF classes. The consultation paper provides explanations on the draft RTS establishing a clearing obligation on the following classes of OTC IRD, which were not included in the first RTS on the clearing obligation for interest rate swaps:

  • fixed-to-float interest rate swaps denominated in CZK, DKK, HUF, NOK, SEK and PLN
  • forward rate agreements denominated in NOK, SEK and PLN

The input from stakeholders will help ESMA in finalising the relevant technical standards to be drafted and submitted to the European Commission for endorsement in the form of Commission Regulations. This includes input regarding the analysis of the costs and benefits that those legal provisions will imply. Comments are due by 15 July 2015.

10 third-country CCPs recognised by ESMA

The European Securities and Markets Authority (ESMA) has recognised ten third-country CCPs established in Australia, Hong Kong, Japan and Singapore.

The recognition by ESMA allows third country CCPs to provide clearing services to clearing members or trading venues established in the EU.

Those CCPs are established in jurisdictions which have been assessed as equivalent by the European Commission with regard to their legal and supervisory arrangements for CCPs. Several other steps led to the recognition of those third-country CCPs, including the conclusion of cooperation agreements with the relevant third-country authorities, as well as the consultation of certain European competent authorities and central banks, as foreseen by EMIR.

As a result, ESMA has published a list of the recognised third-country CCPs as well as the classes of financial instruments covered by the recognition of the following CCPs: ASX Clear (Futures) Pty Ltd, ASX Clear Pty Ltd, HKFE Clearing Corporation Limited, Hong Kong Securities Clearing Company Limited, OTC Clearing Hong Kong Limited, SEHK Options Clearing House Limited, Japan Securities Clearing Corporation, Tokyo Financial Exchange Inc, Singapore Exchange Derivatives Clearing Limited and The Central Depository (Pte) Limited.

Further information

April 2015

Level II validation for trade reporting

ESMA has published a revised Q&A which focuses on level 2 validation, which ESMA expects TRs to implement by the end of October 2015. Details on the specific validation rules are available by clicking on the link directly from the most recent EMIR Q&As p.78.

March 2015

New EMIR Q&As

ESMA has just published the 12th update to its Q&A for EMIR. This update includes further guidance on the authorisation of CCP services, the clearing obligation and the Regulatory Technical Standards (RTS) on direct, substantial and foreseeable effect of contracts within the Union.

Update on implementation schedule for margin requirements

Basel and IOSCO has released a revision to the implementation schedule for margin requirements for non-centrally cleared derivatives. A delay of 9 months has been agreed, which will push the start of the phase-in period for posting and collecting margin from 1 December 2015 to 1 September 2016

February 2015

ESMA issues feedback statement on non-deliverable forwards

ESMA has issued a feedback statement on the central clearing of non-deliverable forwards. This is a feedback statement on the consultation on the clearing obligation for NDFs. ESMA is not proposing a clearing obligation on NDFs based on feedback received.

Pension funds to benefit from a further two year exemption from central clearing requirements

The European Commission has published a report that recommends granting pension funds a two-year exemption from central clearing requirements for their over-the-counter (OTC) derivative transactions. The report, which is based on an extensive study requested by the European Commission, concludes that central counterparties (CCPs) need this time to find solutions for pension funds. At the same time, the report encourages CCPs to continue working on finding technical solutions in this important matter. Ultimately, the objective is that pension scheme arrangements (PSAs) should use central clearing for their derivatives transactions, as is the case for other financial institutions. This is also imperative for financial stability. Under current arrangements, PSAs – which encompass all categories of pension funds – would have to source cash for central clearing. Given that PSAs hold neither significant amounts of cash nor highly liquid assets, imposing such a requirement on them would require very far-reaching and costly changes to their business model which could ultimately affect pensioners’ income. Current EU law provides for a temporary exemption from the clearing obligation until August 2015. A here press release is available.

January 2015

ESMA publishes opinion on Draft RTS on the clearing obligation on interest rate swaps

ESMA publishes opinion on Draft RTS on the clearing obligation on interest rate swaps in response to the European Commission’s notification to adopt with amendments these draft RTS.

IOSCO’s report on risk mitigation standards for non-centrally cleared OTC derivatives

IOSCO publishes final report on risk mitigation standards for non-centrally cleared OTC derivatives. 

Athens Exchange Clearing House authorised

ESMA has added Athens Exchange to the list of authorised CCPs under EMIR.

December 2014

European Commission intends to adopt with amendments the draft regulatory technical standards on the clearing obligation for Interest Rate Swaps

On 18 December the European Commission sent a letter to ESMA informing its intention to endorse with amendments the draft RTS on the clearing obligation for interest rate swaps. In the letter, the Commission outlined changes which it considers are required to the RTS, which include postponing the starting date of the frontloading requirement, clarifying the calculation threshold for investment funds and excluding from the scope of the clearing obligation non-EU intragroup transactions.

Holland Clearing House authorised under EMIR

On 12 December Holland Clearing House was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of BME Clearing such as those in Articles 38 and 39 of EMIR came into force on 16 September 2014.

Extension of transitional period for capital period for EU banks that have exposures to CCPs

The European Commission confirmed in a press release dated 11 December the adoption of an implementing act extending the transitional period for capital requirements for EU banking groups’ exposures to CCPs under the European Capital Requirements Regulation by six months.

November 2014

Delay of second RTS delivery on clearing obligation

The delivery by ESMA to the European Commission of the second draft Regulatory Technical Standards proposing a clearing obligation has been delayed. For your information, this letter from the chair of ESMA notifying the European Commission of the delay.

October 2014

OMIClear authorised under EMIR

On 31 October OMIClear was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of OMIClear such as those in Articles 38 and 39 of EMIR came into force on 16 September 2014.

ESMA launches consultation on draft standards for the clearing of foreign-exchange non-deliverable forwards under EMIR

On 1 October, ESMA published, for consultation, draft regulatory technical standards (RTS) it has to develop under the European Markets Infrastructure Regulation (EMIR) for the clearing of foreign-exchange non-deliverable forwards.

The consultation period runs until 6 November 2014. All contributions should be submitted via the ESMA website.

ESMA defines products, counterparties and starting dates for the clearing of interest rate swaps

On 1 October ESMA issued final draft regulatory technical standards (RTS) for the central clearing of Interest Rate Swaps (IRS) which it is required to develop under EMIR. The RTS define those types of IRS contracts which will have to be centrally cleared, the types of counterparties covered by the obligation and the dates by which central clearing of IRS will become mandatory for them.

ESMA has submitted this final draft IRS RTS to the European Commission, which now has up to three months to endorse them. Following the non-objection period of the European Parliament and Council, the RTS will enter into force and become effective 20 days after its publication in the Official Journal.

September 2014

ESMA consults on draft guidelines clarifying the definition of commodity derivatives under MiFID

On 29 September, ESMA published a consultation paper on future guidelines clarifying the definition of commodity derivatives as financial instruments under the current Markets in Financial Instruments Directive (MiFID I).

The consultation period runs until 5 January 2015. All contributions should be submitted via the ESMA website.

Postponement of reports due by ESMA under Article 85.3 of EMIR

On 29 September 2014, ESMA issued a letter to Michel Barnier, Commissioner for Internal Market and Services, outlining the postponement of reports due under Article 85.3 of EMIR together with justification.

BME Clearing authorised under EMIR

On 16 September BME Clearing was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of BME Clearing such as those in Articles 38 and 39 of EMIR came into force on 16 September 2014.

LME Clear Ltd authorised under EMIR

On 3 September LME Clear Ltd was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of LME Clear Ltd such as those in Articles 38 and 39 of EMIR came into force on 3 September 2014.

August 2014

CCP.A authorised under EMIR

On 14 August CCP Austria Abwicklungsstelle für Börsengeschäfte GmbH (CCP.A) was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of CCP.A such as those in Articles 38 and 39 of EMIR came into force on 14 August 2014.

CME Clearing Europe authorised under EMIR

On 4 August CME Clearing Europe was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of CME Clearing Europe such as those in Articles 38 and 39 of EMIR came into force on 4 August 2014.

July 2014

European Commission writes letter to ESMA regarding definition of FX instruments

On 23 July 2014, the European Commission wrote a letter to ESMA regarding the definition of a financial instrument relating to foreign currency (FX contract). In its letter, the Commission explains that its power to adopt implementing measures under MiFID 1 ceased to apply on 1 December 2012, but notes it will have powers under MIFID 2 and its associated implementing measures (which come into application on 3 January 2017) to clarify the definition of an FX contract. It invites ESMA to carefully consider any approach taken in this area. Finally, the Commission sets out the broad consensus which seems to have been reached in the context of the public consultation with respect to defining FX spot contracts.

European Commission response to ESMA letter regarding frontloading requirement under EMIR

The European Commission’s response (dated 8 July 2014) to ESMA’s letter regarding frontloading under EMIR was published on the ESMA website. The letter from Michel Barnier, Commissioner for Internal Market and Services, agrees with the view that frontloading of OTC derivatives should be avoided in cases where it could undermine the overarching objective of the clearing obligation to reduce systemic risk. This stance is in part supported in light of the potential negative consequences on the market as a result of uncertainty stemming from any such requirement coming into force prior to the relevant RTS.

EMIR reporting advice for clearing member firms

The FCA has contacted a number of our Authorised firms identified as a clearing member and client of a Central Counterparty (CCP) to advise them that authorised or recognised CCPs under European Market Infrastructure Regulation (EMIR) are required to calculate hypothetical capital information. This information must be supplied by CCPs to their clearing members as well as to the competent authority of the clearing member.
We have advised our solo-regulated clearing member firms to let their CCPs know that:

  • the FCA is their competent authority
  • the CCP should send the completed template to the FCA at [email protected]

Firms that are part of a dual-regulated prudential group should note that the PRA are conducting a similar exercise for dual-regulated firms that are clearing members of CCPs.

list of CCPs that are currently recognised or authorised under EMIR is available on the ESMA website.

If you are a clearing member firm and we have not contacted you directly (or if you feel you have been incorrectly contacted), please let us know at [email protected].

For further detail please read our statement.

ESMA seeks new members for Post Trading Consultative Working Group

The ESMA consultative working group (CWG) for post trading is a group of industry representatives which is consulted by ESMA on a range of post trading issues. The term of the current CWG has recently expired and ESMA is accepting applications from stakeholders to sit on the new group. If you are interested in applying, more details are available on the ESMA website.

Applications must be submitted by no later than 18 August 2014.

ESMA launches first round of consultations to prepare for central clearing of OTC derivatives in the EU

The European Securities and Markets Authority (ESMA) has launched a first round of consultations to prepare for central clearing of OTC derivatives within the European Union. The two consultation papers, released on 11th July, seek stakeholders’ views on draft regulatory technical standards (RTS) for the clearing of Interest Rate Swaps (IRS) and Credit Default Swaps (CDS) that ESMA has to develop under EMIR.

ESMA has analysed the classes from several CCP notifications and has determined that some IRS and CDS classes should be subject to the clearing obligation. Following the difference in timing of the corresponding CCP authorisations, the IRS and CDS classes are covered in two separate papers and consultation periods, with a large overlap between the two to give the opportunity to stakeholders to review them and provide feedback at the same time. These two consultation papers may be followed by one or more on other asset classes.

The IRS Consultation Paper is open for feedback until 18 August 2014 and the CDS Consultation Paper until 18 September 2014. ESMA will use the answers received to draft its final RTSs on the clearing obligation for IRS and CDS and send them for endorsement to the European Commission. The clearing obligation will take effect following a phased implementation, with the current proposal ranging from six months to three years after the entry into force of the RTS, depending on the types of counterparties concerned.

All contributions should be submitted online via the ESMA portal.

Updated EMIR FAQs from the European Commission

The European Commission updated its FAQs on EMIR (Part IV) on 10th July to include clarity around segregation requirements for non-EU clearing members of EU CCPs.

Updated EMIR implementation Q&As

The European Securities and Markets Authority (ESMA) issued updated Question & Answers (Q&As) on 10th July on the implementation of EMIR. The new set of Q&As include information on pension scheme exemptions as well as segregation requirements for non-EU clearing members of EU CCPs.

Keler CCP authorised under EMIR

On 4 July Keler CCP was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is now also available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of Keler CCP such as those in Articles 38 and 39 of EMIR came into force on 4 July 2014.

June 2014

Updated EMIR implementation Q&As

The European Securities and Markets Authority (ESMA) issued updated Question & Answers (Q&As) on 23rd June on the implementation of EMIR. The new set of Q&As primarily cover the reporting of collateral and valuation.

LCH.Clearnet Ltd authorised under EMIR

On 12 June LCH.Clearnet Ltd was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is now also available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of LCH.Clearnet Ltd such as those in Articles 38 and 39 of EMIR came into force on 12 June 2014.

European Commodity Clearing authorised under EMIR

On 11 June European Commodity Clearing (ECC) was authorised under the European Market Infrastructure Regulation (EMIR). Further information around the financial instruments the clearing house is authorised to clear is now also available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of ECC such as those in Articles 38 and 39 of EMIR came into force on 11 June 2014.

May 2014

LCH.Clearnet SA authorised under EMIR

On 22 May LCH.Clearnet SA was authorised under the European Market Infrastructure Regulation (EMIR). Further information about the financial instruments the clearing house is authorised to clear is available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of LCH.Clearnet SA such as those in Articles 38 and 39 of EMIR came into force on 22 May 2014.

CC&G authorised under EMIR

On 20 May the Bank of Italy authorized Cassa di Compensazione e Garanzia S.p.A. (CC&G) to operate as a central counterparty under EMIR. On the same date, the Bank of Italy approved the interoperability arrangement between CC&G and the French central counterparty LCH.Clearnet SA. A press release is available on the Bank of Italy’s website and details are also available from the post-trading section of the ESMA Public Register.

Updated EMIR implementation Q&As

The European Securities and Markets Authority (ESMA) issued updated Question & Answers (Q&As) on the implementation of EMIR. Areas covered by the updated questions include:

  • the application of EMIR to Alternative Investment Funds (AIFs)
  • intra-group exemptions
  • treatment of non-EU non-exempt central banks
  • segregation and portability and CCP organisational requirements

ESMA informs European Commission of its intention to ease certain frontloading requirements under EMIR

On 8 May 2014 ESMA sent a letter to the European Commission proposing to limit the scope of the frontloading requirement under EMIR. The frontloading requirement imposes an obligation on counterparties to clear OTC derivative contracts which have been executed after the notification pursuant to Article 5 of EMIR and before the entry into force of the clearing obligation. In the letter, ESMA observes that the frontloading procedure creates uncertainties for OTC derivatives end-users because counterparties will not know that they are subject to the frontloading requirement until classes of OTC derivatives subject to the clearing obligations are specified. This could have adverse impacts on risk hedging and financial stability. ESMA informs the European Commission that it intends to establish the frontloading requirement in a manner that will minimise uncertainty.

April 2014

Draft RTS on margin for non-cleared trades - ESAs publish joint Consultation Paper

On 14 April 2014, the European Supervisory Authorities (ESAs) published a Consultation Paper on draft Regulatory Technical Standards (RTS) on the risk management procedures for counterparties in non-centrally cleared OTC derivatives (which will include mandatory exchange of initial and variation margins), the criteria concerning intragroup exemptions and the definitions of practical and legal impediments. The consultation will allow the ESAs to gather public views on how to ensure a proportionate implementation of the requirements, as well as any other specific aspects that need discussion. The ESAs invite comments on this consultation by 14 July 2014 (comments can be sent by clicking on the "send your comments" button on EBA's consultation web page).

KDPW_CCP and Eurex reauthorised under EMIR

KDPW_CCP was authorised under the European Market Infrastructure Regulation (EMIR) on 8 April 2014. Eurex Clearing AG followed suit on 10 April 2014. Further information about the financial instruments both clearing houses are authorised to clear will be available on the ESMA Public Register under the post-trading section in due course.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of both KDPW_CCP and Eurex such as those in Articles 38 and 39 of EMIR came into force on 8 April 2014 and 10 April 2014 respectively.

European Commission Consultation on FX financial instruments

On Friday 11 April, the European Commission published a consultation on the treatment of FX financial instruments. On its consultation webpage, the Commission states that concerns have been raised about the lack of harmonisation between the EU Member States on where the boundary lies between what is an FX financial instrument and a spot FX contract, and that the Commission therefore seeks stakeholders’ input on where they consider this boundary should be set. The Commission invites responses by 9 May 2014 and the responses will provide important guidance to the Commission when preparing a formal Commission proposal on this issue.

As previously stated, the FCA intends to engage closely with the Commission and ESMA on these issues as their work progresses, and will update market participants on any significant developments relating to these issues via the FCA EMIR web pages and these regular ‘EMIR updates’ emails. In the meantime, and until further notice, the UK regulatory position (as set out on the FCA’s EMIR web pages) remains the same.

European Central Counterparty N.V. reauthorised under EMIR

European Central Counterparty N.V. (ECCP) was authorised under the European Market Infrastructure Regulation (EMIR) on 1 April 2014. Further information about the financial instruments ECCP is authorised to clear is available on the ESMA Public Register under the post-trading section.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on ECCP's clearing members such as those in Articles 38 and 39 of EMIR came into force on 1 April 2014.

March 2014

Final cross-border technical standards published in the EU Official Journal

The final EMIR regulatory technical standards on contracts with a direct, substantial and foreseeable effect within the EU and to prevent evasion of rules and obligations have now been published in the EU Official Journal. They set out the circumstances in which the EMIR clearing obligation, risk mitigation techniques and margin requirements will apply to contracts between two non-EU entities.

The technical standards enter into force on 10 April 2014 (twentieth day following their publication in the Official Journal, which was 21 March) but Article 2 (which sets out which contracts have a direct, substantial and foreseeable effect within the EU) only applies from 10 October 2014.

Updated EMIR implementation Q&As

On 20 March 2014 the European Securities and Markets Authority (ESMA) issued updated Question & Answers(Q&As) on the implementation of EMIR. These updated Q&As clarify issues relating to the reporting of various fields to trade repositories (TRs), the scope of Article 11 and offer further clarity around the intragroup transaction (IGT) exemptions process among other things.

European Commission response to ESMA on the classification of financial instruments as derivatives

On 20 March 2014 ESMA published a letter (dated 26 February 2014) from the European Commission (EC) in response to ESMA’s letter (dated 14 February 2014) to Michel Barnier, Commissioner for Internal Market and Services, regarding the classification of financial instruments as derivatives. In its letter, the EC states that it shares the view in favour of a fully consistent transposition of the relevant MiFID provisions (and consequently EMIR) throughout the Union and invites ESMA to provide further insight on certain areas.

As per our previous EMIR Update on this topic, we intend to engage closely with the Commission and ESMA on these issues as their work progresses, and we will update market participants on any significant developments relating to these issues via our EMIR website and our regular ‘EMIR updates’ emails. In the meantime, and until further notice, the UK regulatory position remains the same. For further information please refer to the domestic legislation section of our EMIR library.

NASDAQ OMX - first European CCP reauthorised under EMIR

Nasdaq OMX became the first European CCP to be reauthorised under the European Market Infrastructure Regulation (EMIR) on 18 March 2014. In accordance with the procedure laid out under Article 5(1) of EMIR, the European Securities and Markets Authority (ESMA) was notified by the Swedish national competent authority (Finansinspektionen) on 18 March 2014 of Nasdaq OMX’s reauthorisation and of the classes of financial instruments Nasdaq OMX was authorised to clear. Further information around Nasdaq OMX and the financial instruments it is authorised to clear was published yesterday by ESMA and is available on its Public Register under the post-trading section.

In line with the clearing obligation procedure set out in Article 5(2) of EMIR, ESMA now has up to six months from the time of the notification to decide whether to recommend a clearing obligation for any of the classes of OTC derivative cleared by Nasdaq OMX. Any recommendation to impose a clearing obligation would be subject to a public consultation by ESMA. If any clearing obligation is imposed, frontloading could apply as set out in Article 4 of EMIR depending on the minimum residual maturity of the relevant derivative contracts.

Consistent with the ESMA Q&As on EMIR (CCP Question 8(c)), the requirements on clearing members of Nasdaq OMX (eg, those in Articles 38 and 39 of EMIR) also came into force on 18 March 2014.

MiFID Transaction reporting requirements

Following the start of EMIR reporting to trade repositories on 12 February 2014, we would like to remind firms that their MiFID transaction reporting obligations remain unchanged and they are expected to continue transaction reporting as per current arrangements. Reporting to trade repositories under EMIR does not replace any transaction reporting obligation under MiFID and firms should continue to submit their transaction reports using an Approved Reporting Mechanism (ARM) in accordance with SUP 17 of the FCA Handbook.

For more information on MiFID transaction reporting requirements, see the transaction monitoring unit pages.

February 2014

Supervisory approach to risk mitigation requirements for non-cleared trades relating to portfolio reconciliation, dispute resolution and compression

In line with our supervisory approach, the FCA expected firms which were unable to comply with risk mitigation requirements for non-cleared trades relating to portfolio reconciliation, dispute resolution and compression to have a detailed and realistic plan to achieve compliance within the shortest time-frame possible. The FCA expects that such plans will be completed and implemented by 30 April 2014 and that firms will be able to demonstrate compliance after that date. 

ESMA letter to the Commission on the classification of financial instruments as derivatives

On 14 February 2014, ESMA published a letter to the Commission, in which ESMA invites the Commission to adopt an implementing act under Article 4(2) of MiFID (or any other measure that the Commission considers appropriate) to clarify the definitions of (1) currency derivatives and (2) commodity forwards that can be physical settled, in order to bring consistency to the application of EMIR across Member States. We intend to engage closely with the Commission and ESMA on these issues as their work progresses, and we will update market participants on any significant developments relating to these issues via our EMIR website and our regular 'EMIR updates' emails. In the meantime, and until further notice, the UK regulatory position remains the same. For further information please refer to the domestic legislation section of our EMIR library.

Updated EMIR implementation Q&As

The European Securities and Markets Authority (ESMA) has issued updated Question & Answers (Q&As on the implementation of EMIR. These updated Q&As clarify, among others, issues related to reporting to trade repositories (TRs) such as on how to construct and generate Unique Trade Identifiers (UTI), the reporting of empty/not available fields and the Unique Product Identifier (UPI) taxonomy. 

Results of the FCA EMIR implementation reviews on reporting and non-financial counterparties

The FCA plans to undertake a number of implementation reviews on key EMIR obligations, with pre-implementation reviews being conducted in advance of obligations taking effect, to assess readiness and establish any areas of concern, and post-implementation reviews conducted shortly afterwards. The results of the latest reviews which focused on firms’ readiness for reporting and non-financial counterparties that are part of a larger financial group have now been published.

European Market Infrastructure Regulation (EMIR) trade reporting start date

A reminder that the EMIR reporting obligation comes into force next week. From 12 February 2014, all counterparties will need to report details of derivative contracts (OTC and exchange traded) they have concluded, or which they have modified or terminated, to a registered or recognised trade repository (TR) in line with EMIR reporting requirements. For more information please see the reporting obligation page.

FCA Handbook changes

On the 31 July 2013 a second EMIR Statutory Instrument  was laid before UK Parliament. The Statutory Instrument includes further supervisory and enforcement powers for the FCA, as well as providing for the operation of indirect client clearing within the UK. In Chapter 11 of CP13/9 Quarterly Consultation (No 2) (September 2013)  we consulted on a number Handbook provisions to reflect the FCA related changes in this second EMIR Statutory Instrument.  These Handbook changes have now been made, effective 31 January 2014.  The FCA instrument and Handbook Notice can be found at the following links:

December 2013

Updated EMIR implementation Q&As (including reporting of exchange traded derivatives)

ESMA has now published an updated version of the Questions & Answers on EMIR implementation. The table of questions on pages six and seven provides a record of which questions and answers are new or were updated on 19 December 2013. There are updates to the OTC questions, CCPs and reporting to trade repositories, including a Q&A setting out which parties have to report exchange traded derivatives.

Updated European Commission FAQs on EMIR, covering the meaning of 'undertaking' and the application of EMIR to municipalities

The European Commission also updated its FAQs on 18 December 2013 (last updated on 8 February 2013), providing clarification on the concept of ‘undertaking established in the Union’ for the purpose of the definition of a non-financial counterparty and the circumstances in which EMIR could apply to municipalities.

ESMA approves ICE and CME Trade Repositories

The European Securities and Markets Authority (ESMA) approved the registrations of two further trade repositories (TRs) on 28 November under the European Market Infrastructure Regulation (EMIR). The newly registered TRs for the European Union (EU) are:

  • ICE Trade Vault Europe Ltd. (ICE TVEL), based in the United Kingdom
  • CME Trade Repository Ltd. (CME TR), based in the United Kingdom

This means that they can be used by the counterparties to a derivative transaction to fulfil their trade reporting obligations under EMIR. The registrations will come into force on 5 December 2013. Following the registration of a first group of TRs on 7 November 2013, which became effective on 14 November 2013, the reporting obligation start date for all asset classes will begin on 12 February 2014. There are now six TRs registered in the EU, which can be used for trade reporting. ESMA registered DDRL, Regis-TR, UnaVista and KDPW on 7 November and has not received any further applications for registration.

November 2013

ESMA publishes final draft technical standards on the cross border application of EMIR

The European Securities and Markets Authority (ESMA) issued final draft regulatory technical standards (RTS) related to derivative transactions by non-European Union (EU) counterparties last week. The RTS provide more detail on the application of EMIR to transactions between non-EU counterparties with a direct, substantial and foreseeable effect within the Union and in relation to non-evasion. 

EMIR Counterparty Classification Tool

The International Swaps and Derivatives Association, Inc. (ISDA), The British Bankers Association (BBA), The Investment Management Association (IMA) and Markit announced the launch of the EMIR Counterparty Classification Tool. It is an online service that facilitates compliance with European Market Infrastructure Regulation (EMIR) requirements regarding classification of counterparties to OTC derivatives contracts and application of the relevant standards of the regulatory requirements. Additional information regarding the tool is available on ISDA’s EMIR Focus Page.

LEI ROC Endorsement of LSE

Please note that the London Stock Exchange (LSE) has now been globally endorsed as a provider of pre-LEIs (as of the 11 November).  Please see the LEI Regulatory Oversight Committee (ROC) website for the full note. The use of globally endorsed pre-LEIs is also referenced in the recently updated ESMA Q&As. This means that pre-LEIs issued by the LSE can be accepted for reporting under EMIR in the EU, Swap Data reporting in the US and also for other jurisdictions who mandate the use of the LEI for trade reporting and are members of the ROC Plenary. It is strongly anticipated that all pre-LEIs that are globally endorsed will transition into LEIs once the LEI governance structure is fully established.

Under the EMIR technical standards on format and frequency of trade reporting counterparties are expected to have an LEI for reporting to trade repositories from 12 February 2014.

Approved registration of first trade repositories

The first trade repository registration decisions have now been made. These registration decisions will take effect from 14 November 2013. On 12 February 2014 the EMIR requirement to report derivatives transactions to trade repositories will come into force. Find more information on these initial registrations on reporting obligations

Updated ESMA Q&As 

ESMA has now published an updated version of the Questions & Answers on EMIR implementation. The table of questions on pages six and seven provides a record of which questions and answers are new or have been updated.

List of non-EEA CCPs

EMIR requires all non-EEA CCPs offering clearing services to clearing members or trading venues in the EEA to seek recognition from ESMA. In order to continuing offering such clearing services, the non-EEA CCPs were required to apply to ESMA for recognition by 15 September. ESMA has published a list, which is not necessarily exhaustive, of non-EEA CCPs which have submitted an application.

October 2013

Results of the FCA’s first EMIR implementation reviews

The FCA plans to undertake a number of implementation reviews on key EMIR obligations, with pre-implementation reviews being conducted in advance of obligations taking effect, to assess readiness and establish any areas of concern, and post-implementation reviews conducted shortly afterwards. The results of the first reviews which focused on the risk mitigation techniques and non-financial counterparties under EMIR have now been published. 

Second set of advice to the EU Commission on equivalence of non EU jurisdictions

ESMA has published its second set of advice to the European Commission on the equivalence of non-EU jurisdictions with EMIR. Following a first set of advice published on 9 September 2013, ESMA has now published its equivalence assessments of the regulatory regimes of Canada, India and South Korea and supplements to its equivalence assessments for Australia, Hong Kong, Singapore and Switzerland.

FCA EMIR web portal available for intragroup clearing exemption applications

Submissions for exemptions for intragroup transactions from the clearing obligation are now being accepted through the FCA EMIR web portal. Please note that submissions are currently only being accepted for transactions between two entities in the same group which are both established in the UK. For more detailed information, please see the EMIR notifications and exemptions page.   

FCA EMIR web portal available for financial counterparties to make dispute notifications

Since 15 September 2013, financial counterparties have been required to  report any disputes between counterparties relating to 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.

The FCA requires financial counterparties to ensure that by the 15th of each month any disputes outstanding in the previous month have been reported through the EMIR web portal. However the deadline for reporting disputes outstanding between 15 September and 30 September has been extended by one week to 22 October, to make sure there is enough time for counterparties to register. More information on dispute reporting and how to register to use the web portal.

September 2013

Hybrid systems trading physically settled gas and power forwards

The FCA has published a statement on hybrid systems trading physically settled gas and power forwards, clarifying that physically settled gas and power forwards traded on multilateral trading facilities (‘MTFs’) are ‘financial instruments’ for the purposes of MiFID and ‘OTC derivatives’ or ‘OTC derivative contracts’ for the purposes of EMIR. 

ESMA advises Commission on equivalence of non-European derivatives rules

ESMA has published its advice to the European Commission on the equivalence of the regulatory regimes for OTC derivatives clearing, central counterparties (CCPs), and trade repositories (TR) of non-EU countries with the European Markets Infrastructure Regulation (EMIR). ESMA has assessed the equivalence of the regulatory regimes of Australia, Hong Kong, Japan, Singapore, Switzerland and the US. Further details are available on the ESMA website.

FCA September Quarterly Consultation Paper

In Chapter 11 of September’s Quarterly Consultation Paper (QCP), a number of FCA Handbook changes are proposed in respect of EMIR.  These changes aim to reflect, and make firms aware of, the FCA’s powers set out in the domestic legislation that HM Treasury recently laid before Parliament.  This follows the changes to the FCA Handbook in April, which related to the first statutory instrument that was made by HM Treasury.

Margin Requirements for non-centrally cleared derivatives (final report published)

The International Organization of Securities Commissions (IOSCO) and the Basel Committee on Banking Supervision (BCBS) have now published the final framework for margin requirements for non-centrally cleared derivatives. See the press release and final report in the links below:

The final requirements have been developed taking into account feedback from two rounds of consultation (a July 2012 consultative paper and a February 2013 near-final proposal) as well as a quantitative impact study [text deleted].  Under the requirements, all financial firms and systemically important non-financial entities that engage in non-centrally cleared derivatives will have to exchange initial and variation margin commensurate with the counterparty risk arising from such transactions. The requirements will be phased-in over a four-year period, beginning in December 2015.

These requirements will be implemented in the EU through new binding technical standards under article 11 of EMIR. The European Banking Authority, in co-operation with the other European Supervisory Authorities, will consult on these rules in due course.

Financial Stability Board publishes update on global OTC derivatives reform

The Financial Stability Board has been tasked by the G20 with monitoring global progress in implementing agreed reforms to OTC derivatives markets. It has recently published a summary update on progressand a more detailed progress report.

August 2013

Reporting disputes

From 15 September 2013 financial counterparties must report any disputes between counterparties relating to 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.

ESMA publishes updated Q&A

The ESMA EMIR Q&A’s have been updated to provide further information for counterparties, CCPs and Trade Repositories on the interpretation and implementation of EMIR. Read the Q&A's on ESMA’s website.

Second EMIR Statutory Instrument laid before UK Parliament

On the 31 July 2013 a second EMIR Statutory Instrument was laid before UK Parliament. The Statutory Instrument includes further supervisory and enforcement powers indirect client accounts at a clearing member and the transfer of indirect client accounts when a client fails to provide indirect clearing services. An indirect client is a client of a clearing member’s client.