EMIR notifications and exemptions

Notifications and applications under EMIR fall into certain categories. Read more about these notifications and applications in the EMIR 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.

Find information on:

Changes to EMIR notifications under EMIR REFIT

EMIR has been amended in the context of the European Commission’s Regulatory Fitness and Performance Programme (REFIT). We use “EMIR REFIT” to refer to the new text of EMIR as amended. 

EMIR REFIT enters into force on 17 June 2019, 20 days after it was published in the Official Journal of the EU.

Upon the entry into force of EMIR REFIT, certain firms are required to submit the following new or amended notifications to the FCA (as well as to ESMA in some cases), as appropriate:

  • FC clearing obligation notification: a new notification from financial counterparties (FCs) which relates to FCs exceeding or ceasing to exceed the relevant clearing thresholds as well as those choosing not to calculate their positions against those thresholds (Article 4a). This notification should be submitted using the clearing threshold notification form found on the Connect system (which needs to be used to submit notifications relating to both the FC and NFC clearing obligations).
  • NFC clearing obligation notification: an amended notification from non-financial counterparties (NFCs) which relates to NFCs exceeding or ceasing to exceed the relevant clearing thresholds as well as those choosing not to calculate their positions against those thresholds (Article 10). This notification should be submitted using the clearing threshold notification form found on the Connect system (which should be used to submit notifications relating to both the FC and NFC clearing obligations).
  • Reporting exemption notification: a new notification which relates to a reporting exemption for certain intragroup OTC derivatives with an NFC (Article 9). This notification should be submitted using the reporting exemption notification form found on the Connect system.

Read how to access Connect.

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

  • an OTC derivative contract
  • its valuation
  • the exchange of collateral for an amount or a higher value than €15 million and outstanding for at least 15 business days

When to report a dispute

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

How to report a dispute

Financial counterparties must be registered on the Connect system and fill in the correct notification to provide the following information:

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

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

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, if a non-financial counterparty exceeds one or more of the clearing thresholds for a particular asset class of derivatives, they 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

This notification must be submitted using the clearing obligation notification form found on the Connect system (which can be used to submit notifications relating to both the FC and NFC clearing obligations).

Non-financials must register on the Connect system  to submit a clearing threshold notification. Non-financials must also submit a clearing threshold notification to ESMA. These 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. Find out more about how to register on Connect.

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

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.

EMIR REFIT has created a new category of financial counterparties, small financial counterparties. These are financial counterparties whose derivatives activity is below each of the asset class-specific clearing thresholds currently applicable to non-financials 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 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.

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.

How to submit a financial counterparty clearing notification

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

To find out more about how to register on Connect, please visit our EMIR Connect webpage.

Intragroup exemption from the reporting obligation

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

From 17 June 2019 any intragroup transaction where one counterparty is a non-financial counterparty (or would be qualified as a non-financial counterparty if it were established in the Union) is exempt from the reporting obligation providing that specific circumstances are met.

The counterparties to that transaction will be subject to the exemption from reporting the relevant derivatives between intragroup transactions involving an NFC, 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

For counterparties entering these derivatives to benefit from this exemption they should first notify their competent authority. The exemption shall be valid from the date that the FCA confirms to the counterparty that the conditions to use the exemption are satisfied (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). 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 the 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 webpage. These notifications must be submitted by a person with appropriate seniority, for example; an executive director, company secretary, or head of compliance.

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 some circumstances, your firm may be exempt from the clearing obligation. For instance:

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

These circumstances are set out in Article 4 of EMIR and Commission Delegated Regulation (EU) 2015/2205 and/or Commission Delegated Regulation (EU) 2016/592 with regard to regulatory technical standards on the clearing obligation (the Clearing RTS).

We are currently accepting applications for all of the above exemptions and derogations. In accordance with ESMA EMIR Q&A  (OTC Question 6(g)), please note that, where counterparties are established in 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

Your firm must be registered on the Connect system  you must fill in the correct application, including the following information:

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

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

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

For more information on what to include in an application, see the Connect system.

What happens next – the review process and timetable

We have 30 calendar days to consider any of the above 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).

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 some circumstances (set out in Article 11 of EMIR and Commission Delegated regulation 2016/2551 (the 'Margin RTS')), your firm may be exempt from the obligation to exchange margin in respect of non-centrally cleared OTC derivatives with other group entities.

For instance:

  • if your firm is a UK counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another UK counterparty belonging to your group, no formal application is required. You should therefore satisfy yourself that you meet the relevant conditions (Article 11(5) of EMIR)
  • if your firm is a UK financial counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another EU financial counterparty belonging to your group, you must apply to us for an exemption (Article 11(6) EMIR)
  • if your firm is a UK non-financial counterparty who wants to be exempt from the margin obligation in relation to OTC derivative transactions with another EU non-financial counterparty belonging to your group, you must apply to us for an exemption (Article 11(7) EMIR)
  • if your firm is a UK non-financial counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with an EU financial counterparty belonging to your group, no formal application is required by the UK non-financial counterparty (Article 11(10) EMIR). A notification of this exemption will be provided to us by the NCA of the EU financial counterparty
  • if your firm is a UK counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another counterparty belonging to your group established in a third country in respect of which the European Commission has adopted an equivalence decision, you must apply to us (Article 11 (8) and (9) EMIR)
  • 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

We are currently accepting applications for intragroup exemptions from margin.

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.

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).

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).