EMIR notifications and exemptions

Notifications and applications under EMIR fall into certain categories. Read more about these notifications and applications in the EMIR and EMIR REFIT regulation and the relevant technical standards.

Firms should consider in advance whether they will need to make notifications or apply for an exemption from certain obligations under EMIR.

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Reporting disputes between counterparties

This section explains more about the dispute resolution requirements under Article 11(1) of EMIR and Article 15 of RTS Commission Delegated Regulation 149/2013.

Since 15 September 2013, counterparties have been required by Article 15(2) of the RTS to report any disputes between counterparties about:

  • the valuation of an OTC derivative contract 
  • the exchange of collateral between counterparties

Counterparties are required to notify the FCA when a dispute is for an amount or value higher than €15 million and outstanding for at least 15 business days.

When to report a dispute

Counterparties must ensure that by the 15th of each month they notify the FCA of any outstanding disputes, or any disputes that have been closed, in the previous month. A nil return is not required if there are no disputes to report in any particular month.

How to submit a dispute notification 

Counterparties must be registered on the FCA's Connect system in order to submit a dispute notification. The information required will include:

  • 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 the reasons that caused the dispute
  • the date the dispute was identified and when it was resolved (if and when it is resolved)

Counterparties are required to submit a new notification via Connect each month a dispute is to be updated, or closed. 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.

For further information on dispute notifications please refer to the EMIR Regulation and the relevant technical standards.

Find out more about how to register on Connect.

Non-financial counterparties: exceeding the clearing threshold

This section explains more about calculating the clearing threshold for non-financial counterparties.

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 and ESMA under Article 10 of EMIR.

Following the entry into force of EMIR REFIT on 17 June 2019, the clearing threshold notifications have been amended for non-financial counterparties. If a non-financial counterparty exceeds one or more of the clearing thresholds for a particular asset class of derivatives (EUR 1bn for credit and equity, EUR 3bn for interest, FX and commodities), they only need to clear all future OTC derivative contracts (whether hedging or non-hedging) in that asset class(es) for as long as they are over the clearing threshold. Non-financial counterparties are not required to clear the OTC derivative contracts in the asset class(es) where they do not exceed the clearing threshold.

Non-financial counterparties established in the UK must notify us if they have exceeded, or are subsequently no longer exceeding, the clearing threshold.

How to submit a notification

Non-financial counterparties are required to be enrolled (and create a profile) on the FCA’s Connect system in order to submit any EMIR notifications. This notification must be submitted using the clearing threshold notification form found on the Connect system. This section of the EMIR notifications can be used to submit notifications relating to both the FC and NFC clearing thresholds.

Non-financial counterparties must also submit a clearing threshold notification to ESMA. All EMIR notifications must be submitted by a person with appropriate seniority, for example; an executive director, company secretary, or head of compliance. To find out more about when to notify ESMA and the FCA please refer to OTC Question 2 of the updated ESMA Q&As.

For further information on the clearing regime for non-financial counterparties, please visit our clearing obligation webpage and our non-financial counterparties webpage. Find out more about how to register on Connect.

Small financial counterparties: exceeding the clearing thresholds

This section explains more about calculating the clearing threshold for small financial counterparties which intend to benefit from the clearing exemption introduced under EMIR REFIT.

Following the entry into force of EMIR REFIT on 17 June 2019, a new category of financial counterparties has been created, commonly referred to as 'small financial counterparties'. These are financial counterparties whose derivatives activity is below each of the asset class-specific clearing thresholds currently applicable to non-financial counterparties under EMIR.

A small financial counterparty is exempt from the clearing obligation but remains subject to the risk mitigation obligations, including the margin requirements.

The implication is that firms need to determine whether they are small or large by calculating their 12 month average aggregate group position of OTC derivatives in each asset class and comparing it to set clearing thresholds (EUR 1bn for credit and equity, EUR 3bn for interest, FX and commodities).

If a financial counterparty is below all the relevant thresholds and hence deemed to be small, it does not need to clear its OTC derivatives trades. If a financial counterparty determines that it exceeds one or more of the clearing thresholds, it will be required to clear all its OTC derivatives trades and must notify the FCA and ESMA before becoming subject to the clearing obligation 4 months later. Finally, if a financial counterparty chooses not to calculate its group position of OTC derivatives, it must also notify the FCA and ESMA before becoming subject to the clearing obligation 4 months later.

How to submit a financial counterparty clearing notification

This notification should be submitted using the clearing threshhold notification form found on the FCA's Connect system (which can be used to submit notifications relating to both the FC and NFC clearing obligations). Financial counterparties must be registered on the FCA’s Connect system in order to submit a clearing threshold notification. All EMIR notifications must be submitted by a person with appropriate seniority, for example; an executive director, company secretary, or head of compliance.

For further information on the clearing regime for financial counterparties, please visit our clearing obligation webpage.

To find out more about when to notify ESMA and the FCA please refer to OTC Question 2 of the updated ESMA Q&As.

Find out more about how to register on Connect.

Intragroup exemption from the reporting obligation

This section explains more about the intragroup exemption from the reporting obligation.

Following the entry into force of EMIR REFIT on 17 June 2019 any intragroup transaction where at least one counterparty is a non-financial counterparty (or would be qualified as a non-financial counterparty if it were established in the Union) may be exempt from the reporting obligation providing that specific circumstances are met.

The counterparties to that transaction may be subject to the intragroup exemption from the reporting requirements, provided that:

  • both parties are included in the same consolidation on a full basis;
  • both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures; and
  • the parent undertaking is not an FC

To benefit from this exemption counterparties are required to notify the FCA and demonstrate that the conditions above are satisfied. If no objection is notified by the FCA, the exemption will be valid from the end of the three-month period after a counterparty’s notification. For intragroup transactions between a UK counterparty and a counterparty in another EU Member State, an objection from either the FCA or the NCA of the relevant EU counterparty is sufficient to deny the exemption. For more information please refer to ESMA Q&A TR question 51.

Once the FCA has confirmed to the counterparty that they may benefit from the exemption, the counterparty should send reports with Action type “E = Error” for all open derivative contracts with the counterparties for which the reporting exemption is valid.

How to submit a reporting exemption notification

This notification should be submitted using the reporting exemption notification form found on the FCA’s Connect system. These notifications must be submitted by a person with appropriate seniority, for example; an executive director, company secretary, or head of compliance.

For further information on the reporting requirements, please visit our reporting webpage.

Find out more about how to register on Connect.

Timely Confirmation

This section explains more about the timely confirmation requirements under Article 11(1) of EMIR and Article 12 of RTS 149/2013.

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.

Pension scheme arrangements: exemption from the clearing obligation

This section explains more about the exemption from the clearing obligation under EMIR for certain pension scheme arrangements.

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 from the clearing obligation for their OTC derivative contracts that are objectively measurable as reducing investment risks directly related to their financial solvency. The temporary exemption from the clearing obligation for pension scheme arrangements has been extended by another two years from the date of entry into force of EMIR REFIT (further extendable twice by an additional year).

Pursuant to Article 89(2) of EMIR, we have a list of 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).

We have assessed the entities and arrangements listed 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.

There is a list of pension scheme arrangements which benefit from a temporary exemption from the clearing obligation.

Intragroup exemptions from the clearing obligation

This section explains more about intragroup exemptions from the clearing obligation under Article 4 of EMIR.

Under EMIR, intragroup transactions may be exempt from the clearing obligation provided certain conditions have been met:

  • 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)

These circumstances are set out in Article 4 of EMIR and the relevant regulatory technical standards on the clearing obligation (the Clearing RTS).

In accordance with ESMA EMIR Q&A (OTC Question 6(g)), please note that, where counterparties are established in 2 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

In order to benefit from the intragroup exemption from clearing, counterparties must be registered on the FCA’s Connect system in order to submit this application. The information required will include:

  • 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, 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 notify the FCA via email (EMIR @fca.org.uk) pursuant to Article 4(2)(b) of EMIR, once the Commission has adopted an equivalence decision under Article 13 of EMIR).

All EMIR notifications must be submitted by a person with appropriate seniority, for example; an executive director, company secretary, or head of compliance.

For further information on the clearing regime, please visit our clearing obligation webpage.

To find out more about the conditions that need to be met in order to benefit from the intragroup exemption from clearing, please refer to OTC Question 4(d) of the ESMA Q&As.

Find out more about how to register on Connect.

What happens next – the review process and timetable

We have 30 calendar days to consider applications for intragroup exemptions from the clearing obligation. Within this 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).

Intragroup exemptions from margin requirements for non-cleared derivatives

This section explains more about intragroup exemptions from the margin requirements for derivatives transactions not cleared through a central counterparty under Article 11 of EMIR.

Our video on intragroup exemptions from margin and the application process provides more information on what firms are expected to do in order to benefit from the exemption.

Under EMIR, intragroup transactions may be exempt from the margin requirement in respect of non-centrally cleared OTC derivative contracts (Article 11 of EMIR and Commission Delegated regulation 2016/2551 (the 'Margin RTS')) provided certain conditions have been met:

  • 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)
  • 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. Such derogation will be time limited and expire in accordance with Article 36 of the 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 2 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

Firms need to apply by completing the relevant form and sending it to us by email to [email protected] along with the relevant supporting documentation, as detailed in the Margin IGT User Guide (link below).

We have two types of application form. The first form is a single pair application and should be used if your firm requires an exemption with just one other group entity. The second is a multiple pairs application form which can be used if your firm requires an exemption with multiple entities within your group and the details required in Section 1 (Risk Management Procedures) are the same for all the entities within your application. Please note a maximum of 20 intragroup pairs can be submitted within the multiple pairs application form.

What happens next – the review process and timetable

We have 3 months to consider any of the above margining exemption applications. Within this 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).