Find out about margin requirements for uncleared derivatives under the UK European Market Infrastructure Regulation (UK EMIR), counterparties and transactions subject to this, and exemptions.
The margin requirements first took effect from 4 February 2017 under EMIR.
They continue to apply under UK EMIR, subject to your firm categorisation and derivatives volumes.
Use this page to check:
- whether your firm needs to exchange margin on a transaction
- which type of margin applies (initial or variation)
- when you need to apply to us for an exemption
If you’re a counterparty in scope of the margin requirements under UK EMIR, you must exchange margin on your over-the-counter (OTC) derivatives contracts that aren’t cleared through a central counterparty (CCP).
Process for intragroup exemptions from January 2027
From 1 January 2027, we’re introducing a simpler process for counterparties who want to exempt intragroup transactions from the clearing obligation or bilateral margin requirements.
For full details and what you’ll need to do as a counterparty, see chapter 5 of PS26/21[1] or UK EMIR notifications and exemptions[2].
Margin types
Under UK EMIR, there are 2 types of margin that you must exchange.
Variation margin (VM)
Variation margin covers current exposure.
It is calculated using a mark-to-market position.
Initial margin (IM)
Initial margin covers potential future exposure for the expected time between the last VM exchange and the liquidation of positions on the default of a counterparty.
Which firms are in scope
Counterparties subject to margin requirements
If you’re a financial counterparty or non-financial counterparty above one of the clearing thresholds[3], you are covered by the margin requirements.
If you're subject to the margin requirements, you’ll need to exchange VM.
You may also need to exchange IM.
How to check if you need to exchange initial margin
To find out whether you also need to exchange IM, you must calculate your average aggregate notional amount on a group level, covering both UK and non-UK entities.
Include all your uncleared OTC derivative transactions.
- Find the outstanding notional amounts on the last business day of March, April and May each year.
- Calculate the average of these 3 figures.
If 1 of the 2 counterparties to the transaction has an average below €8bn, the counterparties do not need to exchange IM.
You must repeat the calculation at least every 12 months.
Transactions subject to margin requirements
The margin requirements apply to all new OTC derivative transactions that are not cleared through a CCP, with some exceptions.
Exemptions
- FX forwards and FX swaps (physically-settled) and currency exchanges: VM only, no IM is required. In addition, no VM is required for physically settled FX forwards and FX swaps where one of the counterparties is not a credit institution or designated investment firm under the UK Capital Requirements Regulation (CRR) or wouldn’t qualify as such if it were established in the UK.
- Single-stock equity options and index options
- Covered bond and securitisation OTC derivatives entered into for hedging purposes: if the relevant conditions are met, only VM applies, and only to the covered bond entity or securitisation special purpose entity
- One-way obligations (for example, options): one-way margin applies.
- Intragroup transactions: exempt if they meet relevant conditions. You may need to notify the FCA before using an intragroup exemption. For more detail, see UK EMIR notifications and exemptions[2].
For full details of the relevant conditions and to check what you need to do, see UK EMIR[4] and the technical standards[5] on our Handbook website.
