Find out more about the UK European Market Infrastructure Regulation on derivatives, central counterparties and trade repositories (UK EMIR), which imposes requirements to improve transparency and reduce the risks associated with the derivatives market.
The European Market Infrastructure Regulation (EMIR) has been onshored into UK legislation via a number of statutory instruments (SIs) and Binding Technical Standards (BTS).
A list of UK EMIR onshoring legislation can be found on the UK EMIR library page.
UK EMIR imposes requirements on all types and sizes of entities that enter into any form of derivative contract, including those not involved in financial services. It imposes requirements to improve transparency and reduce the risks associated with the derivatives market.
It applies indirectly to non-UK firms trading with UK firms. UK EMIR also establishes common organisational, conduct of business and prudential standards for central counterparties (CCPs) and trade repositories (TRs).
UK EMIR requires entities that enter into derivative contracts, including interest rate, foreign exchange, equity, credit and commodity and emission derivatives, to:
- report details of derivative contracts to an FCA registered, or recognised, TR
- clear, via a CCP, those OTC derivatives subject to a mandatory clearing obligation
- implement risk mitigation techniques, including operational processes and margining, for bilateral over-the-counter (OTC) derivatives that are not cleared by a CCP
UK EMIR REFIT
The onshored UK EMIR REFIT also brings into UK legislation amendments to UK EMIR that make the regime more proportionate for certain firms. Key changes include the following:
- Financial counterparties that are considered small (small financial counterparties or SFCs) are exempted from the clearing obligation, while remaining subject to risk mitigation obligations.
- Non-financial counterparties (NFCs) are subject to reduced clearing obligations.
- The exemption from the clearing obligation for Pension Scheme Arrangements (PSAs) is extended by another 4 years for UK and EEA PSAs.
- A streamlined reporting regime, including mandatory delegation to FCs when facing an NFC, and exemption from the reporting requirements for intragroup transactions when one of the counterparties is an NFC.
The Treasury has confirmed that the UK will create legislation to bring into UK law requirements under UK EMIR, including:
- requirements for firms who offer clearing services to do so on fair, reasonable and non-discriminatory, transparent commercial terms (FRANDT requirements)
- requirements for TRs to have policies and procedures in place to reconcile and validate the data reported to them and for the orderly transfer of data to other trade repositories
Temporary Transitional Power
The Treasury gave UK financial regulators the power to make transitional provisions to financial services legislation for a temporary period. This was known as the Temporary Transitional Power (TTP).
Our use of the TTP has ended and firms must fully comply with UK onshored regulatory obligations. The TTP as laid out in Treasury legislation expires on 31 December 2022. However, in line with agreed timescales we stopped using the power on 31 March 2022, except in relation to the Share Trading Obligation (STO) and the Derivative Trading Obligation (DTO).
We continue to monitor market and regulatory developments and will review our approach if necessary.
We applied the TTP on a broad basis. However, transitional provisions were already included within a number of SIs that implement UK EMIR, so the use of the TTP for EMIR requirements was, in the majority of cases, not required.
There are a few limited areas (detailed in the TTP directions) where the TTP applied to UK EMIR.
However, the UK EMIR reporting, clearing and margin requirements were identified as key requirements. This meant that firms had to comply with UK EMIR reporting, clearing and margin requirements immediately following the end of the Brexit transition period on 31 December 2020.
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