UK EMIR for non-financial counterparties

Read more about non-financial counterparties under UK European Market Infrastructure Regulation (UK EMIR), including reporting to trade repositories and risk mitigation for uncleared trades.

Non-financial counterparties that only enter into derivative contracts that are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of the non-financial counterparty, may be exempt from certain requirements under EMIR.

However, for transparency, all non-financial counterparties must comply with requirements to report to trade repositories (TRs) and certain requirements for risk-management procedures in relation to non-cleared OTC derivative contracts.

In cases where derivatives are not objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of a non-financial counterparty, and a certain clearing threshold is exceeded, the UK EMIR requirements apply to these non-financial counterparties in the same way as they apply to financial counterparties under UK EMIR.

Reporting to trade repositories

Under UK EMIR, the details of all derivative contracts must be reported to an FCA registered, or recognised, trade repository (TR), which centrally stores reports of derivative transactions.

Access to this data enables authorities to have a better picture of the derivatives market. TRs also publish a weekly overview of aggregate derivatives positions per asset class.

The reporting obligation applies to all derivatives, including: 

  • over-the-counter (OTC) derivatives; and 
  • exchange traded derivatives (ETDs)

Both financial and non-financial parties that enter into a derivatives contract are subject to the reporting obligation.

Both parties to a derivatives contract must report separately to their chosen FCA registered, or recognised, TR, stating the details of every derivative contract that they enter into and every change or termination. 

UK EMIR REFIT – updated reporting requirements

Since 18 June 2020, a financial counterparty will be solely responsible and legally liable for reporting on behalf of both counterparties, the details of OTC derivative contracts concluded with a non-financial counterparty not subject to the clearing obligation. For more details, please see our reporting obligation page. 

You must report the details no later than the business day following the transaction, the clearing or the change to the contract. You can report to a TR yourself, or outsource reporting to a third party.

In addition, if you enter into an intragroup transaction where one counterparty is a non-financial counterparty (or would be qualified as a non-financial counterparty if established in the UK), you may benefit from an exemption from the reporting obligation following the submission of a notification to us. This can be done via our Connect page.

To benefit from this exemption, non-financial counterparties and financial counterparties must meet specific conditions. These conditions are referred to in Article 9(1) of UK EMIR and referred to in a notification to us. 

For more information on this notification process, please see our UK EMIR notifications and exemptions page.

For more information on trade reporting, timetables and the details that have to be reported, please see: 

Risk mitigation for uncleared trades

Where OTC derivative contracts have not been cleared through a central counterparty, there are certain risk management requirements that apply to all non-financial counterparties in relation to:

  • timely confirmation of trades
  • portfolio reconciliation
  • dispute resolution procedures
  • portfolio compression

The hedging definition and the clearing threshold

If you’re a non-financial counterparty, you need to assess whether any OTC derivative activity is above the clearing thresholds specific to the asset classes of derivatives contracts.

This activity is measured on a group-wide basis that is not objectively measurable as reducing risks directly related to the commercial activity or treasury financing activity of the non-financial counterparty.

If you’re a non-financial counterparty above the clearing threshold (NFC+), then you become subject to the same requirements as financial counterparties, including:

  • additional reporting requirements
  • the clearing obligation
  • stricter risk management procedures
  • valuation and bilateral margin requirements

The clearing threshold calculation is a 2-step test.

Notifications for non-financials exceeding the clearing threshold

For more information on notifications for non-financials exceeding the clearing thresholds, please refer to our UK EMIR notifications and exemptions page.

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